The Covid-19 pandemic has revealed fissures in the social fabric of economies developed or developing, big or small. The financial industry, thanks to its relatively early and broad adoption of technology and strengthened balance sheets following the 2008 financial crisis, has so far seen relatively few business failures. In fact, many banks have posted healthy profits throughout 2020, even while setting aside provisions for future non-performing loans.
The stark contrast between exuberant equity markets and the dire state of the main street economy has brought a renewed sense of urgency in calls for social responsibility, sustainable growth and stakeholder capitalism. But it’s not just outside activists who are the leading voices. Industry leaders such as Bank of America’s chairman and chief executive Brian Moynihan are among the most powerful advocates for responsible banking.
It is also a global trend. In Asia, leading financial firms such as China Construction Bank have laid out a vision of ‘new finance’, calling for a deeper impact and longer-term effectiveness of financial inclusion to address social inequality and the misallocation of resources. At the heart of this vision lie the democratisation of digital technology. Fintech and financial inclusion become the core long-term growth strategies, and are embodied in many large-scale inclusive service platforms. These innovative platforms, implemented with nascent technologies in Cloud, Big Data and artificial intelligence technology, enable lenders to analyse huge amounts of data from disparate sources, and generate a multi-dimensional profile for proactive credit and risk models. These reflect customers’ credit-worthiness and risk characteristics in an accurate and holistic manner.
‘Hui Dong Ni’ and ‘Yu Nong Tong’ are two such examples from China Construction Bank. The former, meaning ‘Benefit follows you’, is an inclusive finance mobile app that services a diverse group of SMEs and retail customers from start-ups to farmers to those closer to the poverty line. Key features such as two-way interaction, ‘one-minute’ approval and a 24 /7 service with complete on-line process and costs transparency, have elevated ‘Hui Dong Ni’ to be an industry-leading platform with 77 built-in inclusive finance use cases, 11m registered users, 3.6mcertified corporate customers, and over RMB250bn in total credit approvals.
The Yu Nong Tong platform is dedicated to the agricultural sector and carries relevant educational content as well as low-cost credit products for farmers. It operates nationwide in China and has over RMB2tn in total loans outstanding.
The demand for such products and services could not be clearer. The challenge now is to build on what has been achieved in the Covid crisis. The key to this lies in collaboration: industry leaders must work together to reshape the next generation of finance, where technology and financial inclusion are the recipe for a socially-responsible and sustainable path to long-term growth.
Joseph Ding is Senior Researcher at China Construction Bank University in New York. He expresses the views in this article in a personal capacity.