The platform economy, as an economic activity that leverages digital technologies, has had a positive impact on the financial sector as well as economic growth. Platforms and digital technologies have solved many of the challenges facing the financial system, especially in inclusive finance.

China has seen momentum in developing mobile payments, online investment, big tech credit and digital currency, which all play a significant role in driving inclusive finance. These areas are expected to play a critical role in the country's future economic growth.

To begin with, the platform economy has a great impact on the financial sector, which can be narrowed down to "three increases and three decreases".

The "Three increases" means that the platform economy has helped "increase business scale, improve efficiency as well as user experience". As the platform can offer services to many customers at the same time, costs are minimized so overall efficiency will naturally be enhanced.

Digital platforms also offer personalized services. With technological advances, these services will be much smoother, more convenient to use and more popular among consumers.

Just imagine, if mobile payments fail, users are less willing to use them. If 2G communication technology was still in use today, online payments and other web-based activities would be very inconvenient. Technological advances have therefore continuously improved the overall user experience.

The "Three decreases" refers to "reducing costs, lowering risks and minimizing contact". In terms of risk control in particular, user data accumulated by the platform will be very helpful to identify risks in advance.

Based on the above changes, digital platforms will also have a certain impact on the rules and even laws of economic activity and exchanges. It will make users more reliant on the platform itself, but the platform will also be closely related to the economy.

China first embraced the internet in 1994, which gave birth to the first internet company-Yinghaiwei. Since then, a group of internet giants like NetEase, Baidu, Alibaba, Tencent and Sina have emerged.

At present, the country's platform companies have developed quite well and are comparable to leading foreign internet heavyweights, thanks mainly to improvements in digital technology, market-oriented reforms, the large population and relatively independent market conditions.

However, the development of the country's digital economy also needs regulations, especially when it comes to personal data protection. Some platforms collect and analyze data illegally, which violates privacy and harms consumer interests.

This is also why in the past year regulators have taken a series of measures to oversee platforms. Such efforts aim to drive the platform industry to develop in a more standardized manner. From this perspective, the country's platform economy has broad development prospects.

To elaborate further, finance is an indispensable part of economic development. The biggest problem in the current financial development is information asymmetry, which can easily lead to serious systemic risks. An important function of the financial system is to reduce the degree of information asymmetry and improve the reliability of transactions, or what we call "inclusive finance".

Inclusive finance is increasingly playing a more critical role in China's economic development. On the one hand, the nation's economic growth has been very successful in the past years with an average annual GDP growth of over 9 percent. But there are many gaps between regions, problems with income distribution and operating environments for small and medium-sized enterprises.

The importance of inclusive finance will be even more prominent as common prosperity has been highlighted as a major goal of economic development. It means that economic development going forward will pay more attention to the livelihoods and businesses that inclusive finance serves.

On the other hand, in the new stage of development, China's economy will move to high-quality development, and innovation will play a crucial role in driving economic growth. To drive such innovations, small, medium-sized and micro enterprises are the main force.

In the past, inclusive finance was mainly intended to promote social equity. But today, a more important function is to promote sustainable economic growth.

China made a big leap in inclusive finance from 2016 to 2020 mainly due to the application of digital technology.

Digital finance started in 2004 with the launch of Alipay and the latter developed its own payment system similar to eBay in the United States. In 2010, digital payments were finally launched. Later, WeChat payments arrived along with a series of digital finance modalities.

I prefer to use the concept of digital finance to refer to the application of digital technology in finance. Digital finance is different from internet finance and financial technology. Its connotation tends to balance the two, including both tech companies using digital technology to provide financial services, and traditional financial institutions using digital technology to improve their financial services.

In recent years, the development of digital finance has been very active at home and abroad. But foreign countries pay more attention to blockchain technology, distributed accounts and the metaverse and more specifically cryptocurrency, digital currency, cross-border payments and other fields. China's digital finance is more related to mobile payments, online investment, big tech credit and digital renminbi.

The development of inclusive finance in China is relatively insufficient, and a considerable number of financial services are inadequate, especially for small and medium-sized enterprises, low-income households and rural economic entities.

The above groups have little access to financial services. Therefore, digital finance products have been warmly welcomed.

Another important reason for the rapid development of mobile payments is the application of digital technology. This enables mobile payments to have high service quality and allows the platform to scale profits. Daily active customers of WeChat Pay and Alipay have exceeded 1 billion, which is an unprecedented breakthrough, and few digital payment tools can achieve that.

In addition, digital finance has made outstanding progress in the field of big tech credit. In the past, it was very difficult for SMEs to obtain loans, and it was hard to acquire customers and control risk as well.

Big tech credit and loans help solve the two bottlenecks by making it possible to acquire a large number of customers. In addition to WeChat and Alipay, Douyin, Meituan, JD and other large platforms also have a very large number of users.

Today, anywhere in China, as long as one has a smartphone and a signal, financial services are accessible. Big tech credit is also able to analyze customers, evaluate their creditworthiness and then find ways to convert them into customers, which solves the problem of customer acquisition.

Whether for surfing, searching, socializing, watching short videos, ordering takeaways or using e-commerce shopping, user trends will leave digital footprints.

The accumulation of such a digital footprint becomes big data, which is very helpful to monitor borrowers' conditions in real-time.

Under the traditional model, banks use financial data of an enterprise as the basis for evaluation, but the financial data are basically based on quarterly units. On the contrary, the digital footprint is real-time data, which can illustrate the behaviors or transactions of users in real-time.

With the support of platforms and digital technology, there will be more new development areas in the future, such as wealth management supported by digital technology, intelligent investment advisory platforms, as well as industrial chains, the internet of things and supply chain finance. In conclusion, digital finance has gained some momentum with the help of digital and platform technologies, but there is still a long way to go in the future.

The writer is chairman of the academic committee of the China Finance 40 Forum and deputy dean at the National School of Development at Peking University.

The views don't necessarily reflect those of China Daily.