Internet finance was discussed at the Boao Forum for Asia 2014, during which various opinions clashed. Some called for stricter regulation, some said that such services are risky and detrimental to the current financial system in China, while others downplayed Alibaba's Yu'ebao, or denied online financial services were an innovation at all.

Those who support online financial services see it as an innovation, which should be left alone, as hasty and rigid regulations would easily undermine its growth. According to many economists, Internet finance raises efficiency, increases market vitality, and can shake the monopoly of banks in allocating financial resources in China.

Xie Ping, executive vice president of China Investment Corporation, hosts a panel of "Internet-Finance: Towards Rational Exuberance" during the Boao Forum for Asia (BFA) annual conference 2014 in Boao, south China's Hainan Province, April 9, 2014. [Photo: Guo Cheng/Xinhua]

"The democratic and inclusive nature of Internet finance is a huge innovation in modern finance," Xie Ping, vice president of China Investment Corp., said at the Boao Forum on April 9.

Online financing changes the flow of a financing process, producing better efficiency and more equality. Apart from that, better regulation and easier access are among the reasons why online financial services appeal to the public.

Middle and small-size businesses, which used to have difficulties getting bank loans, are turning to Internet financing to secure funds, an example showing how social wealth is better allocated according to market rules.

The rapidly ascending popularity of Internet finance poses a serious threat to the current financial system, forcing it to reform. One cannot deny that this is an innovation.

The United States has defined financial innovation as "taking advantage of the loopholes in financial regulation," which is a virtuous cycle, because such a process will give birth to a wider range of financial products, along with better policies to regulate them.

It is fair to say that those who deny online finance represents an innovation understand neither finance nor innovation.