In the ever-evolving landscape of finance, the concept of industrial digital finance may seem both familiar and obscure to manyThe terms "industrial digitalization" and "financial digitalization" have been circulating in China for the past five to six yearsHowever, the integration of these two domains to promote the development of industrial digital finance is a relatively recent concept that has gained traction only in the last three to five yearsThe implementation of this idea started in earnest around 2021 or 2022, following preliminary discussions that began around 2020.

To understand the urgent need for banks to explore industrial digital finance, it's essential to look at several key motivationsFirstly, industrial digital finance is anticipated to shape the direction of commercial banks' corporate business development, making it a crucial opportunity for business transformationThe banks that establish a foothold in this realm early are likely to dominate the corporate banking landscape in the years to come.

Moreover, as industrial digital finance is still in its infancy, all banks are at the beginning of this journey, emphasizing the need for urgency, determination, and a willingness to innovate and break boundariesThe expectation that the implementation of new services will be instantaneous is unrealistic; typically, such transitions are gradualBanks aim to lay a solid foundation for practical implementation in industrial digital finance within a two- to three-year mark.

How then do banks develop the service capabilities necessary for industrial digital finance? The first step lies in integrating financial services into the industry, particularly within digital contextsFinancial services must be embedded in scenarios where industrial digitalization has already taken rootFurthermore, banks should incorporate industrial digital finance into each transaction phase within the industrial settingSince the push for industrial digitalization is gaining momentum in China, it's crucial to recognize that various industries are at different stages of digital maturity

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This variability means that designing banking products without considering existing digital capabilities could hinder client adoption due to high costs.

The second aspect involves banks restructuring their processes to facilitate industrial digital financeThis restructuring might involve reimagining digital workflowsAchieving a complete overhaul might not be feasible right away, but gradual implementation is essentialConsequently, future clients of industrial digital finance services are likely to shift towards online interactions, creating a complete industrial cycleBanks must also acknowledge that transitioning to a fully digital operation requires time and isn't an instant process.

Achieving full digital operations is inherently complex, as banks must foster ecological integration that includes providing external data platform companies with data connectivity and conducting system data comparisons with ecological partnersFor example, banks may require external oversight information regarding logistics and warehousingMoreover, industrial digital finance incorporates capabilities like aggregated payments and smart contracts, necessitating systemic connectivity within the bank's own architectureThis transformative process will likely require one to two years for refinement and integration with both internal systems and external ecosystems.

Additionally, traditional banks' risk management practices and capabilities need rethinkingIn promoting industrial digital finance, banks must reconceptualize their understanding of riskThe methods, levels, and technologies of digital risk control contrast sharply with traditional risk managementNotably, industrial digital finance allows for creating a comprehensive data chain and eliminating information asymmetry, which significantly improves risk managementBy comprehensively understanding the authenticity and controllability of client transactions, banks can enhance their risk management strategies.

In the realm of industrial digital finance, digital credit is expected to play a substantial role

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For instance, prepayment financing can be seen as a form of digital credit where banks provide financing based on real trade scenarios between recognized clients who possess commercial creditworthinessThis reflects a shift in risk control capabilities.

Moreover, banks face significant opportunities during this transformationEmbracing industrial digital finance represents a critical juncture in corporate banking transformation—an opportunity that, if executed effectively, can lay the groundwork for sustainable development over the next decade or twoConversely, failure in this endeavor could result in banks finding themselves on the defensive in a mechanized economyThis represents a strategic shift aligned with the national push towards industrial digitalization, which continues to reap substantial achievements in domains like technological innovation.

Several industries in China have greatly benefitted from effective industrial digitalization, particularly logisticsThe proliferation of smart warehouses utilizing robotic systems for storage, handling, and sorting goods reflects the significant advancements made in this sector—leaps that far exceed those seen in countries with slower digital progressAnother area seeing rapid development is autonomous driving, with pilot programs being tested extensively in multiple regionsSimilarly, the manufacturing industry has increasingly adopted robotic technology, with Chinese-produced robots accounting for a significant 50-60% of the global market shareAs industries progress swiftly in digitalization, banks must align their services accordingly, ensuring they meet the needs of industrial clients in an expanding digital marketplace.

A considerable challenge arises from the complexity of system interconnectionsIt is often the case that once systems are integrated, changing them is rarely an option due to the high costs involved for both partiesExperiences in supply chain financing reveal that establishing these connections can be cumbersome initially; however, once successfully connected, partnerships tend to be sustained unless significant problems arise

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In this sense, industrial digital finance could have an even wider scope than partnerships with key manufacturers, resulting in unavoidable interdependencies that enhance competitive advantages for early movers.

The emergence of industrial digital finance is particularly significant for corporate banking, which encompasses facets like supply chain finance, digital financial inclusion, and technologically-driven financing solutionsGiven that banks' clientele spans these sectors, industrial digital finance naturally aligns with these financial services.

As many banks now identify industrial digital finance as a fundamental component of their corporate and overall banking strategies, a comprehensive system must be constructed around itThis includes ongoing efforts in team development, requiring a capable workforce where personnel across front, middle, and back offices engage with and comprehend the intricacies of industrial digital financeAdditionally, banks must enhance their operational capabilities and knowledge continuously, ultimately forging a team equipped to thrive in a competitive landscape.

Within this system-building exercise, the design of products plays a pivotal roleIndustrial digital finance encompasses a range of digitized solutions, and unlike the traditional approach of offering one or two discrete products, future protocols should focus on bundled offerings that deliver integrated solutions based on clients' full operational requirementsFor example, prepayment and inventory financing in the current supply chain finance model often operate independentlyIn a future where industrial digital finance is practiced, banks should consider these services as a cohesive product solution, given the potential for financing practices to overlap in actual operations.

In practice, banks must strive for an interconnected product line that not only supports independent functioning but also allows for flexible integration across various product offerings

This adaptive nature of products is paramount, as future industrial digital financial services must cater to the diverse scenarios and needs of different clients.

Within multiple industries, clients often assume varied roles—sometimes acting as both buyers and sellersFor instance, a gasoline dealer purchases from upstream sources before wholesaling to gas stationsSuch clients exhibit needs for both prepayment and regular inventory financing, thus necessitating a holistic digital solutionBanks are tasked with structuring such comprehensive solutions, clarifying transaction patterns and service modalities within the ecosystem of the petrochemical industry and subsequently designing digital products guided by clients' operational logic.

Technology support is another major area for banks as they transition to industrial digital financeMeeting the requirements for system integration, especially, demands collaboration between IT personnel and business staff within banks to accurately convey demands to the IT development department, facilitating successful service implementation.

Furthermore, establishing a supportive organizational framework within banks is crucial, particularly with an emphasis on incentive structures to promote engagement across the workforce in industrial digital finance initiativesAny innovation in business models requires robust mechanisms of support, including the operational mechanisms for industrial digital finance and effective incentive frameworks.

Creating a culture conducive to industrial digital finance is essential, rooted in widespread understanding and acceptance of digital concepts, particularly in the context of advancing the nation's digital infrastructure.

Identifying banks' potential client base under this new model is vital as wellChina has made significant investments in digital infrastructure, establishing a data governance management system and a landscape rich in platforms offering entrepreneurial support to small and medium enterprises.

Data management is closely tied to the evolving landscape of cloud platforms, facilitating efficient data handling processes, although considerable investment is necessary for effective cloud solutions

Moreover, the advancement of AI has made substantial contributions to various banking services—automated voice and image processing have emerged as significant tools for customer interaction, while AI's capabilities in text recognition can aid in generating risk reports from fundamental data.

Additionally, advancements in communication technology, such as high-speed networks and quantum communication, have laid robust foundations for the integration of industrial digital finance, enhancing connectivity across diverse platformsGiven China's impressive progress in establishing digital infrastructure, banks should create conducive conditions aligned with national strategies and recognize the implications of industrial digital integrations.

Thus, banks are encouraged to keep abreast of national policies, gaining insights into rapidly evolving industries and their respective advancements to inform strategic banking operationsUnderstanding the infrastructure within specific cities will enable banks to effectively plan and execute their industrial digital finance projectsFurthermore, exploring synergies between industry and finance is paramount, allowing for a mutually beneficial relationship that fosters a strong ecological footing.

Ultimately, recognizing and clarifying the identity of banks' clientele, which now spans the myriad stakeholders involved in industrial ecosystems, including primary manufacturers, wholesalers, and end consumers, is an urgent taskBy profoundly understanding customer needs and preferences, banks can develop tailored solutions, enhancing the sustainability of their operations.

Collaboration with various platforms is also noteworthy; many industry platforms support small enterprises, gathering and meeting their diverse financing needsEngaging with such platforms can expose banks to a rich client base—a trend that transcends geographic boundaries.

Lastly, banks should also focus on firms within industrial parks—clusters of companies operating in specialized sectors—that can offer data and insights that might assist banks in providing their digital services

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