(Yicai Global) Nov. 2 -- Financial technology has made great strides but there are still challenges such as protection of trade secrets and consumer privacy, according to the head of China’s central bank.

The coronavirus pandemic has sparked a significant shift in financial behavior, the 21st Century Business Herald reported, citing People's Bank of China Governor Yi Gang. People have turned to virtual platforms from face-to-face dealings, with contactless payments becoming more popular, he said.

New technologies such as Big Data and artificial intelligence create stresses for traditional commercial banks and also challenges for the central bank, Yi said at the Hong Kong Fintech Week conference today. Making services safer amid growing demand for the convenience offered by fintech is an important topic for the central bank, he added.

Fintech and large tech firms have brought improvements in efficiency and reduced costs, which are an important part of financial innovation. Tech giants have also greatly improved the level of financial services, and demand in remote areas has also increased, which used to be unimaginable, Yi said. That has changed the rules of the game, he added.

Traditional financial institutions have begun to cooperate with big tech companies, using their advantages in data to develop financial services, provide business loans, and improve risk control, Yi said.

Tech companies have made more progress in financial services in emerging markets and developing economies than in advanced economies, and demand for such services among low-income groups and in rural areas has increased, according to a report released by the Financial Stability Board last month. But competition may threaten the profits and status of financial institutions and create risks for consumer data privacy protection, it said.

In reference to the PBOC’s pilot program for a sovereign digital currency, Yi said it has made good progress and the e-yuan has already been used in more than 4 million transactions so far, worth about CNY2 billion (USD299 million).

The e-yuan started as an alternative to cash, and the two will coexist in China in the future, according to Yi.

The pilot program is still in its infancy, and it requires very complex and extensive legal frameworks and regulations, Yi said. He also emphasized the need for transparency in the program, adding that the PBOC will discuss the currency with other central banks and regulatory authorities.

Editor: Tom Litting