The financial-technology boom that turned China into the world’s biggest market for electronic 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 new data from payment systems, social media and other sources, they’re growing more comfortable with smaller borrowers that they previously shunned in favour of state-owned giants.
For China’s US$13 trillion ($17.8 trillion) economy, which expanded at its weakest pace since at least 1992 last quarter, the implications could be profound. Non-state firms -- mostly small businesses -- account for about 60% of growth, employ 80% of workers, and have been disproportionately squeezed by a more than two-year government crackdown on shadow lenders.
“Small and medium enterprises are really the boiler room of the economy,” said Keith Pogson, global assurance leader for banking and capital markets at Ernst & Young based in Hong Kong. “It used to be a segment that banks thought was too difficult and too risky. But now they run their model and work out what the risks are so they feel more comfortable.”
China is quickly becoming a world leader in the use of big data and artificial-intelligence technology to make loans, according to Cliff Sheng, co-head of Greater China financial services at Oliver Wyman, a consulting firm. Among the country’s biggest advantages: it takes a more relaxed approach toward privacy than many other jurisdictions.
“Our legal framework and regulatory environment -- which raise fewer privacy concerns -- make it easier to generate a huge amount of data and thus provide an unparalleled testing bed,” Sheng said.
