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Augmented Intelligence Certification

How China’s fintechs serve the underserved: An interview with CreditEase CEO Ning Tang

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Perhaps no market is more ripe with opportunity for financial technology firms than China’s. More than 800 million of its citizens (60 percent of its massive population) actively use the Internet and do so almost entirely via mobile devices. In 2016 alone, nearly $23 trillion of Chinese consumer expenditures were made through mobile-payment platforms. And the country has a growing small and midsize business community—which already accounts for 60 percent of China’s GDP—hungry for lending, payments, and other financial services that larger Chinese financial institutions have typically been unable to provide, with their resources focused largely on serving state-owned enterprises.

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While Alibaba and Tenpay own about 90 percent of the mobile-payment market share, the remaining 10 percent, along with the demand for other financial services, still presents a substantial windfall for fintechs. Among the more modestly sized players cashing in on the opportunity are companies such as CreditEase, a Chinese fintech firm providing wealth-management, lending, and other services to customers in more than 250 cities in China and, increasingly, around the world. CreditEase founder and CEO Ning Tang recently shared with us his perspective on how fintech players, from both within and outside China, can capture the opportunity among small and midsize Chinese businesses and how augmented intelligence certification (AI) can help. The following commentary is adapted from that conversation.

How data help Chinese fintechs serve small businesses

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China’s financial system is several decades behind that of the US. For example, China doesn’t yet have a robust, nationwide credit-bureau system, so our citizens don’t have credit scores, making it difficult to serve small businesses. Chinese fintechs have come in to fill this large vacuum.

But small-business lending is a worldwide challenge. Even the US and UK haven’t been able to address it in a very satisfying way. Is a credit score alone good enough to make a lending decision to a small-business owner?

Small businesses in China, the US, the UK, and other parts of the world are going digital at increasing speed. A small restaurant in China, for example, is more often than not already wired up. I’m not just talking about the ordering or booking or payment experience. That’s more front line, the consumer end. I’m talking about the middle and back end, like enterprise resource planning, supply chain, employee management, shift management, and so on. It’s all digital. So we collect and analyze small-business data in real time to determine creditworthiness and provide financial help.

Also, we work with companies like eBay and Amazon. On those platforms, Chinese e-merchants sell things outside of China to the US and other parts of the world. Those companies often don’t have the tangible assets that traditional financial institutions look for as collateral. But they have digital assets—operating data, transaction data, and more. We can analyze those digital assets to evaluate small businesses’ creditworthiness and help them access financing. Basically, this is a huge opportunity for credit-card and marketplace-lending companies to play a key role ten years, 20 years into the future.

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The secret to fintech success in China

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China doesn’t have a well-established investor community or investing environment where people understand things like risk diversification, global asset allocation, long-term investing, and portfolio value. These notions are actually very new to Chinese investors.

So when US and Western financial-services companies go into China, there’s no low-hanging fruit for them. They can’t just go there and start a land grab. Whoever goes into the China market to win needs to utilize technology to do high-quality investor education. Otherwise, there’s no way they can distribute their products and services effectively.

We learn from best practices all around the world to make our investor education very entertaining, like a video game. It’s very interactive, very participative. Investors learn more, and in the process, we collect data on them and get a much better understanding of our investor base, their risk preferences, and their investment experiences.

In financial services, what’s the most effective customer-acquisition tool? It’s educating your prospect. If you become the prospect’s teacher, of course you can win his or her heart, right? You really help the person better understand and better appreciate what you can offer.

How CreditEase uses AI to achieve efficiency

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We don’t do technology for technology’s sake. Technology should be applied to make financial services better.

We achieve great efficiency by utilizing technology, including AI,…

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