In­clu­sive fi­nance to lift fin­tech firms

China Daily (Hong Kong) - - BUSINESS - By WU YIYAO in Shang­hai wuyiyao@chi­

With more banks of­fer­ing ser­vices for in­clu­sive fi­nance, com­pa­nies of­fer­ing credit re­port­ing sys­tems based on big data anal­y­sis will ben­e­fit, said an­a­lysts.

Fi­nan­cial tech­nol­ogy or fin­tech com­pa­nies, par­tic­u­larly those fo­cused on credit anal­y­sis, will greatly re­duce cost of lend­ing and also re­duce credit risks. So, they are likely to ex­pe­ri­ence fast growth on mar­ket de­mand as com­mer­cial banks are join­ing the in­clu­sive fi­nance mar­ket.

That mar­ket is cur­rently dom­i­nated by smaller, pri­vate fi­nan­cial in­sti­tu­tions, such as peer-to-peer or P2P lend­ing plat­forms and con­sumer fi­nance plat­forms.

Li Bin, CEO and pres­i­dent of Shang­hai-based fin­tech com­pany Huaxia Fi­nance, said the size of un­met in­clu­sive fi­nanc­ing is “sig­nif­i­cant” be­cause lenders of­ten have concerns over non-per­form­ing loans.

In China, only 30 per­cent of cit­i­zens are cov­ered by ex­ist­ing credit re­port­ing sys­tem, while in ma­ture mar­kets the per­cent­age could be 70 per­cent or higher.

“In­fra­struc­ture for credit re­port­ing sys­tems re­mains to be com­pleted, but it will take time. But we can’t just wait. Fin­tech so­lu­tions help build mod­els that keep non-per­form­ing lend­ing rate to a sta­ble level that guar­an­tees steady scal­ing up with­out ex­pand­ing risk ex­po­sure,” said Li.

By the end of July, the five big­gest banks in China— In­dus­trial & Com­mer­cial Bank of China, Agri­cul­tural Bank of China, China Con­struc­tion Bank, Bank of Com­mu­ni­ca­tions and Bank of China — had launched in­clu­sive fi­nance arms, just two months af­ter the au­thor­i­ties con­cerned called for bet­ter fi­nan­cial ser­vices for a wider group of peo­ple across China.

More banks are to set up in­clu­sive fi­nanc­ing to bet­ter fi­nance smaller en­ter­prises, farm­ers and un­der­priv­i­leged peo­ple who have lit­tle ac­cess to fi­nanc­ing ser­vices, Zhong­tai Se­cu­ri­ties said in a re­search note.

A re­search note by Bei­jing­based Analysys In­ter­na­tional said the mar­ket for fi­nan­cial in­for­ma­tion and fin­tech so­lu­tions re­lated to in­clu­sive fi­nanc­ing could reach 100 bil­lion yuan ($14.7 bil­lion) in the next decade.

Credit in­ves­ti­ga­tion and re­port­ing tech­nolo­gies could re­duce op­er­a­tional cost of lend­ing 1 mil­lion yuan to 2 yuan from 2,000 yuan, ac­cord­ing to Analysys re­search.


of cit­i­zens are cov­ered by credit re­port­ing sys­tem, so there is scope for growth

Wu Xiaol­ing, a NPC Stand­ing Com­mit­tee mem­ber and for­mer deputy gover­nor of the Peo­ple’s Bank of China, said banks should “up­date their un­der­stand­ing” of in­clu­sive fi­nance, and take ad­van­tage of tech­nolo­gies and in­fra­struc­ture re­lated to credit re­port­ing sys­tems.

By us­ing in­ter­net-based tech­nolo­gies, mo­bile pay­ment tech­nolo­gies and big data anal­y­sis, banks could have bet­ter ac­cess to data than ever be­fore, which would help un­der­stand small bor­row­ers’ credit record and fi­nan­cial sit­u­a­tion.

For first-time small bor­row­ers, tech­nolo­gies could fill in, in terms of com­pen­sat­ing for the lack of record of pre­vi­ous bor­row­ings, said Wu.

Xue Zhenghua, chief tech­nol­ogy of­fi­cer of Bei­jing-based Hengchang Fi­nance, a fin­tech provider, said in­ter­net-based tech­nolo­gies will help lenders to col­lect in­for­ma­tion in an ef­fec­tive and pre­cise man­ner.

“In­ter­net tech­nolo­gies of­fer com­plete so­lu­tions be­yond just a chan­nel of lend­ing. The point of in­clu­sive fi­nance is to be as in­clu­sive as pos­si­ble, mak­ing fi­nanc­ing ac­ces­si­ble to more clients with­out ex­pand­ing risks,” said Xue.

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