Comparative Advantages and Risks of Internet Finance

Comparative Advantages and Risks of Internet Finance

Internet finance is not a simple combination of the Internet and the financial industry, but a new model and new business generated naturally to adapt to new needs after users are familiar with and accepted by the network technology level. It is an emerging field combining traditional financial industry and Internet technology.

Compared with traditional finance, Internet finance has the core features of information recording and information processing, which can greatly reduce transaction costs and improve the efficiency of capital allocation.

First, Internet finance has payment advantages. Based on mobile payment, the payment method under Internet finance mode transfers money value through mobile communication equipment and uses wireless communication technology to repay creditor’s rights and debts. The development of mobile communication technology and equipment is the fundamental reason for the development of mobile payment. Compared with traditional payment, mobile payment is more convenient and humanized. Users can pay anywhere, anytime and in any way.

Secondly, Internet finance has the advantage of process. Different from the traditional financial industry, which is based on the large number theorem and sampling survey, Internet finance analyzes users’ financial behaviors based on big data and cloud computing. According to the user’s credit information, consumption information, location information and so on, we can judge the user’s risk level more accurately, so as to get a more reasonable risk management solution, which is helpful to improve the situation of market information asymmetry and improve the quality of financial market operation.

It also has the advantage of integration. Everyone has a little spare time. More value can be created by consolidating and using these little moments. Mobile Internet technology is not limited by geographical and temporal characteristics, just can make use of these fragmentary time. In the field of Internet, fragmentary time and funds can also be fully applied, and financial fragmentation has become a development trend.

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While improving financial efficiency and bringing dividends of financial innovation, Internet finance does not change the high-risk nature of the financial industry and the Internet industry, and its risks become more complex. The risks of Internet finance are reflected in the following aspects.

First, the legal orientation of the organization is not clear, and the business boundary is vague. The business activities of Internet financial enterprises often break through the existing regulatory boundaries and enter the gray area of law, and may even form illegal fund-raising and illegal operations.

Second, the third-party depository system of customer funds is absent, and there are security risks in the depository. In particular, P2P lending platforms will generate a large amount of capital precipitation, and are prone to misappropriation of funds or even flight with funds in the absence of a third-party fund escrow mechanism.

Third, risk control is not sound, and may cause operational risks. Some Internet financial enterprises unilaterally pursue business expansion and profitability, adopt some controversial and high-risk transaction modes, and fail to establish customer identification, transaction record preservation and suspicious transaction analysis and report mechanism, which is easy for criminals to use the platform for money laundering and other illegal activities. In addition, some Internet enterprises do not pay attention to internal management, and the level of information security protection is low. There is a risk of customer privacy disclosure.

Therefore, information backup and safe storage of the Internet finance industry are very important. The Internet finance industry in Malaysia is also developing gradually recently. Therefore, more and more backup solutions in Malaysia are attracting people’s attention.

Laman Rasmi Pergerakan Pemuda