Technology, innovation boost financial inclusion in China

By Jiang Xueqing | China Daily
Updated: Aug 6, 2019
An online store owner applies for a loan through a MYBank mobile phone app in Jingdezhen, Jiangxi province. [Photo provided to China Daily]

An industrywide consensus to develop financial inclusion in China with a greater reliance on available technologies has been reached, financial service professionals and experts said.

Zeng Gang, deputy director of the National Institution for Finance and Development, said digital driven innovation will become the most important way of developing financial inclusion, which means making financial services accessible and affordable to all individuals and businesses, regardless of net worth and size.

"China will continue to deepen digital financial inclusion, which will restructure traditional financial models and become a direction of business transition for financial institutions. Digital financial inclusion will bring changes to financial concepts and the organizational structure of financial institutions, restructure their business procedures, and improve their data integration capability and technical skills," said Zeng in delivering a report at the second China financial inclusion innovation and development summit recently held by People's Daily.

To improve financial inclusion, commercial banks must rely on technologies and data to lower management costs and increase operational efficiency.

As a result, banks must enhance their capability in big data integration, said Liu Guiping, president of China Construction Bank Corp.

"We should make an overall plan for enterprise data collection, storage, analysis and application, build a data-driven procedure covering the front, middle and back offices of banks, manage and control the collection, identification, processing and desensitization of data throughout the entire process, and promote the standardization and visualization of data," said Liu.

He highlighted the importance of extracting key data on the development of financial inclusion for banks to maximize product design, enhance customer acquisition capability, improve financial services, and cultivate competitive advantages.

Compared with banks, financial institutions which have a shorter history and less resources will dig deeper into the nonfinancial data of potential customers, such as those collected legally by telecom operators and travel information provided by other business partners so they can explore modeling based on this kind of data, said Chen Haitang, chief business officer of Merchants Union Consumer Finance Co Ltd.

"Nonfinancial data are not directly related to financial services, so we need multidimensional data to produce a representation or simulation for these customers, and we must constantly upgrade the model we created. As we keep expanding our customer network to smaller cities and rural areas, the further we go, the more nonfinancial data we explore to have a clear view of our customers," said Chen.

He stressed the necessity for companies to operate with a data-driven mindset and reiterated the industrywide reliance on financial technologies such as artificial intelligence, big data, cloud computing and blockchain.

By constructing their skills in machine learning and risks, companies are able to attempt to minimize fraud. Merchants Union Consumer Finance, a licensed consumer finance company headquartered in Shenzhen, Guangdong province, has tried to do so.

Company data showed that out of 1 million loan applications it has received, only one case of fraud has occurred.

The company is also using technologies to reduce labor costs. More than 95 percent of its customer service is now delivered by robots. It is estimated that with artificial intelligence, the company will save more than 40 million yuan ($5.8 million) a year by using robots for debt collection, in a scenario where it collected debts of 100,000 individuals and businesses per day on average.

With the adoption of technologies, Ping An Puhui lowered its operating costs by 58 percent compared with the level of five years ago. The company is a unit of Ping An Insurance Group which specializes in small business financing and consumer finance.

"Using technical means including facial recognition, micro-expression recognition and voiceprint recognition, we have not only improved risk analysis but also lowered costs and enhanced customer experience," said Ni Rongqing, vice-president of Ping An Puhui.

Before these biometric recognition instruments were introduced, a customer had to submit many documents to apply for a loan during a face-to-face interview at the counter of a financial institution. Now, the once complicated procedure of loan application and approval can be done remotely, Ni said.