The integration of technology and finance has become one of the most transformative forces in modern banking. In a 2018 speech at the Shenzhen Fintech (Banking) Industry Exchange, Zhou Tianhong, a senior representative from China Merchants Bank, shared valuable insights into how emerging technologies—particularly artificial intelligence and blockchain—are reshaping financial services. While some trends have evolved significantly since then, the core observations remain relevant, especially when evaluating blockchain’s real-world impact in finance.
The Driving Force Behind Financial Innovation Is Technology
Technology is no longer just a support function in banking—it's the engine of transformation. Over the past decade, financial institutions across China have dramatically increased their investment in tech talent and infrastructure. While some banks plan to double their IT workforce, China Merchants Bank has taken a more measured but equally strategic approach. As former President Tian Huiyu noted, “Banking is a centuries-old industry, and changing its business model is extremely difficult. The only force capable of fundamentally disrupting it is technology.”
This belief underpins the bank’s long-term commitment to fintech innovation. Since its founding 31 years ago, the bank has consistently prioritized technological advancement. Today, that vision manifests in rigorous exploration of AI, blockchain, and distributed ledger technologies—not for hype, but for practical value.
👉 Discover how leading financial institutions are leveraging blockchain for real-world applications.
Artificial Intelligence: Progress with Limits
Artificial intelligence holds immense potential in banking—from fraud detection to customer service automation. However, as Zhou emphasized, AI today is still in its early stages, particularly in cognitive capabilities.
Modern AI breakthroughs are largely driven by deep neural networks, which gained momentum after 2012 due to algorithmic advances. These systems excel at pattern recognition but rely heavily on massive labeled datasets and computational power. They lack true understanding.
Take machine translation as an example. Even with 90% accuracy, AI doesn’t comprehend meaning—it merely matches patterns from vast bilingual corpora. Without continuous retraining, performance degrades quickly because language evolves constantly.
Similarly, optical character recognition (OCR) in banking faces challenges. A model trained on scanned documents may fail when applied to mobile-captured images due to differences in lighting or angle. This reveals limited generalization ability—something humans handle effortlessly.
While machines surpass humans in computational intelligence, they lag far behind in perceptual and especially cognitive intelligence—the ability to reason, learn abstractly, and apply knowledge contextually. Therefore, while AI tools enhance efficiency, they are not yet replacements for human judgment in complex financial decisions.
Cryptocurrencies: Not Currencies, But Speculative Assets
Zhou offered a clear-eyed assessment of cryptocurrencies like Bitcoin—one that remains valid even years later.
1. Cryptocurrency ≠ Money
True money functions as a stable medium of exchange and store of value. Cryptocurrencies fail this test due to extreme volatility. Daily price swings exceeding 10% make them impractical for everyday transactions.
2. Unclear Intrinsic Value
After ten years of existence (as of 2018), no widespread economic utility has emerged beyond speculation and niche use cases in gray-market transactions. The U.S. government treats most tokens as securities, not currencies, requiring compliance with federal securities laws.
3. ICO Risks and Regulatory Crackdowns
Initial Coin Offerings (ICOs) became vehicles for fraud when unregulated. In response, both China and the U.S. imposed strict controls:
- China banned all ICO activities outright.
- The SEC began enforcing securities regulations, mandating refunds for non-compliant projects and issuing clear guidelines: innovation doesn’t exempt anyone from legal responsibility.
These actions by the world’s two largest economies created a global cooling effect on crypto markets—explaining much of the prolonged downturn post-2017 peak.
4. Decentralization Is Overstated
Despite claims of decentralization, power in crypto ecosystems concentrates around:
- Core development teams controlling protocol changes.
- Large mining pools influencing consensus.
Events like the Bitcoin Cash (BCH) hard fork revealed deep factional divides—proof that governance ultimately centers around influential groups, not pure decentralization.
Blockchain: Practical Use Cases in Finance
While skeptical of crypto hype, Zhou affirmed blockchain’s legitimate potential—especially in inter-institutional collaboration.
What Blockchain Really Is
Blockchain is one form of distributed ledger technology (DLT)—originally developed for Bitcoin—but not the only possible architecture. It enables shared, tamper-resistant record-keeping across multiple parties without a central authority.
Smart Contracts: Promising but Limited
Smart contracts automate execution based on predefined rules. However, they cannot fully capture complex legal agreements or societal norms. They lack the nuance required for autonomous governance or dispute resolution.
👉 See how blockchain is being used to streamline cross-border financial operations.
Proven Applications in Banking
China Merchants Bank has implemented over a dozen blockchain pilots, primarily in scenarios involving:
- Interbank reconciliation
- Trade finance documentation
- Supply chain financing
- Identity verification across institutions
In these cases, blockchain reduces friction, increases transparency, and minimizes counterparty risk—all critical in multi-party financial workflows.
However, despite heavy investment globally, no blockchain system has yet transformed the broader economy like the internet did. Claims of a “value internet” remain speculative. True disruption requires scalable, interoperable, and regulation-compliant systems—still works in progress.
Key Takeaways and Outlook
Blockchain is not magic—it’s a tool. Its value lies in specific contexts where trust among participants is low, data integrity is paramount, and coordination costs are high.
Zhou concluded:
“Blockchain is useful and worth exploring. We will continue investing in it. But calling it ‘revolutionary’ today lacks sufficient evidence.”
This balanced view aligns with current industry trends: cautious experimentation over blind adoption.
Core Keywords:
- blockchain in finance
- distributed ledger technology
- fintech innovation
- smart contracts
- cryptocurrency regulation
- interbank blockchain solutions
- AI in banking
- financial technology trends
Frequently Asked Questions
Q: Is blockchain widely used in banks today?
A: Yes, but mostly in pilot programs or closed consortiums. Real adoption focuses on trade finance, compliance tracking, and cross-institutional data sharing—not public cryptocurrencies.
Q: Can blockchain replace traditional banking systems?
A: Not currently. Legacy systems handle volume and compliance better. Blockchain complements them in specific areas but isn’t ready for core banking replacement.
Q: Why do governments regulate ICOs so strictly?
A: Because many ICOs operated as unregistered securities offerings, exposing retail investors to fraud and loss. Regulation protects market integrity.
Q: Does blockchain eliminate the need for trust?
A: No. It shifts trust from institutions to code and consensus mechanisms—but you still need trusted validators, auditable code, and governance frameworks.
Q: Are cryptocurrencies banned everywhere?
A: No. While China prohibits trading and ICOs, other countries regulate them (e.g., U.S., Japan). Some central banks are even developing digital currencies (CBDCs).
Q: Will AI replace bank employees?
A: Partially—in repetitive tasks like data entry or fraud monitoring. But human oversight remains essential for decision-making, ethics, and customer relationships.
👉 Explore institutional-grade blockchain solutions shaping the future of finance.