With usage of real-time payments data and a risk-management system that breaks down more than 3,000 variables, Ma’s 4-year-old MYbank has already lent 2 trillion yuan ($290 billion) to nearly 16 million small companies.
The online bank is spearheading a subtle revolution in the way China lends to small businesses, taking aim at a credit bottleneck that has held back Asia’s largest economy for decades.
In a process that takes only three minutes, borrowers can apply with a few taps on their mobile and receive cash almost instantly if they’re approved; it involves zero human bankers at default rate of about 1% (so far).
The FinTech boom that transformed China into the world’s biggest market for e-payments is now changing how banks interact with companies that drive most of the nation’s economic growth. As MYbank and its peers crunch reams of fresh data from payment systems, social media and other sources, they’re growing more comfortable with smaller borrowers that were previously shunned in favor of state-owned juggernauts.
For China’s compelling $13 trillion economy, which experienced its weakest pace since at least 1992 last quarter, the connotations could be profound. Non-state firms -- mostly small businesses -- account for about 60% of growth, employ 80% of workers, and have been unevenly squashed by a more-than-two- year government crackdown on shadow lenders.
According to Cliff Sheng, co-head of Greater China financial services at the Oliver Wyman consulting firm, China is quickly becoming a world leader in the use of big data and AI technology to make loans, among the country’s biggest advantages: it takes a more lenient approach towards privacy than several other jurisdictions.
MYbank, which earned 670 million yuan last year, is far from the only lender using technology to boost small-business lending. Units of both Tencent Holdings Ltd. and Ping An Insurance Group Co. have similar offerings, while state-owned China Construction Bank Corp. is critically increasing its presence in the space.
The nation’s second-largest lender uncovered a mobile app in September that enables the processing of loan applications for up to 5 million yuan in 2 minutes. Construction Bank boosted its small-business lending by 51% last year, more than twice as fast as the industry. The bank charges an average interest rate of 5.3% for one-year loans, which is barely above the 4.35% benchmark lending rate, and says defaults have held at a minute 0.3%.
Jack Ma, MYbank, China, Oliver Wyman, China Construction Bank Corp, e-payment, mobile, lender, Tencent Holdings, Ping An Insurance Group