China a fast learner when it comes to artificial intelligence-powered fintech, experts say

While US technology giants such as Google, Facebook and Apple race to dominate the growing commercial market for artificial intelligence (AI), China Inc is digging deep to create a broad-based platform for this technology to drive the country’s economic development.

That was the consensus drawn from keynotes and panel discussions on Thursday at Finnovasia, the part of Hong Kong Fintech Week focusing on the future of AI in finance.

Significant headway has been made on the mainland in AI, based on advances in computer-processing power, algorithms and data collection used by academic researchers and major internet companies such as Baidu, Alibaba Group Holding, Tencent Holdings and JD.com.

In July, the State Council laid out goals to build a domestic AI industry worth nearly US$150 billion in the next few years, and to make the mainland an “innovation centre” in this field by 2030.

“The US has better scientists doing research in AI … [But regarding] the union of AI and financial technology, China is leading and will continue to dominate in the future,” Chan Ka-keung, adjunct professor of finance at the Hong Kong University of Science and Technology, said during a panel discussion on the mainland’s rise in AI.

Chan said China’s success was helped by consumers enthusiastically embracing new technology and how they had no issues about sharing relevant data with trusted service providers, such as those in online search, e-commerce and social media.

During the same Finnovasia panel, Ling Kong, chief technical officer at online lending company Dianrong, pointed out that the company serves millions of customers every month, each bringing plenty of data sets that are used for making decisions.

Chan also said the rapid growth of new fintech services, such as peer-to-peer lending marketplaces and online money market funds, was made possible by a lack of innovation by the country’s traditional banks in addressing the needs of not only the average consumer, but also many small and medium-sized enterprises.

High-flying start-up Ant Financial Services Group, which runs online payments service Alipay and money market fund Yu’ebao, has made AI a key driver for expanding its businesses and improving customer service.

Douglas Feagin, the senior vice-president of global business at Ant Financial, said in a keynote on Thursday that the company’s customer service was “powered by AI technologies like natural language processing, machine learning and voice recognition”.

“The possibilities are really endless – of what we can do here,” said Feagin, a former senior partner at Goldman Sachs. He said AI – in particular, deep-learning technology – had helped to detect fraud and anticipate issues at Alipay, which has about 520 million users.

Deep learning, a subset of a broader family of so-called machine-learning technologies, is concerned with algorithms that teach computers to learn by example and perform tasks based on classifying various data, including images, sound and text.

“So our fraud loss today is less than one in 1 million,” said Feagin. “This is a fraction of the fraud losses of other global payments players.

“Our system scans thousands of variables in any given transaction, looking at user behaviour patterns, then analysing the broader environment around the transaction to see if there are any red flags that would cause concern,” he said.

Ant Financial is so confident of the system that it decided to put its power in the hands of Alipay customers.

“We said we will protect you for up to 1 million yuan loss for less than 2 yuan a year [in charges],” said Feagin. “We worked with a local insurance company to provide that policy … because this is really added value [providing] peace of mind.

“I know my account is not going to be compromised for 2 yuan a year.”

He said the system and other AI-fuelled capabilities are being tested by Ant Financial on the mainland to refine them in preparation for a roll-out in other markets around the world, including Hong Kong.

Ant Financial, which was valued by a CLSA analyst last year at US$74.5 billion, is an affiliate of New York-listed Alibaba, the owner of the South China Morning Post.

Eberhard Schoeneburg, the lead AI adviser at global consulting firm PwC, said the future of AI will be driven by start-ups, including early-stage companies that have never been heard of.

“Right now, the AI market is dominated by all these big companies – the Googles, Facebooks and Apples of the world,” he said. “However, in my eyes, the small companies will not rely on all these deep learning and other [existing] tools because they will invent their own tools.”

A recent report by the McKinsey Global Institute said AI-led automation can give the mainland economy “a productivity injection that [will add] 0.8 to 1.4 percentage points to GDP growth annually, depending on the speed of adoption”.

China was the world’s second-biggest investor in AI enterprises last year, injecting US$2.6 billion into the sector, according to the state-run think tank, Wuzhen Institute. The United States topped the list with US$17.9 billion in investments.

“When it comes to the applications, the systems and market for AI, there is a lot going on in China,” said HKUST’s Chan.