Alibaba-backed MYbank, a Chinese online bank with a focus on lending, announced that it will be opening up its artificial intelligence, computing and risk management capabilities to financial institutions in China, in what is called their Star Plan.

Through these provisions, the bank hopes to help 1,000 financial institutions provide more cost-effective financing to SMEs and China’s farmers within the next 3 years.

MYbank is an online bank that offers its services entirely on the cloud, without any physical branches. The aforementioned technology developed by MYbank helps them increase efficiency and reduce cost, with claims that it helps customer service as well.

MYbank is one of the brands under Ant Financial Services Group, formerly Alipay. It is an affiliate of the Alibaba Group. The company is mainly known for its payment platform Alipay, and is estimated to be worth approximately $150 billion.

During the announcement of the Star Plan at the 2018 SME Financing Summit in Hangzhou, Chairman of MYbank and CEO of Ant Financial Eric Jing said:

“The widespread application of advanced technologies in the SME financing space has dramatically improved risk management and lowered costs.”

“With these innovations, we can unlock new opportunities for financial institutions and enable them to sustainably serve the needs of SMEs and farmers.”

Bringing Efficiency to SME Loans

A World Bank report about financial exclusion reveals that only 14% of small firms obtained a loan or line of credit from the bank. This is a huge gap compared to the 51% rate among large corporations. The percentage of Chinese loans among smaller enterprises are still much lower than other G20 counterparts (Argentina, Australia, Brazil, Canada, etc.).

Small loans can be an important tool for SMEs to scale their businesses, and could be an untapped market for Chinese banks to fulfill.

The reasons cited for the lack of loan applications include complex application procedures, high collaterals, unfavorable interest rates and the loans not being sufficient, among others.

An Existing Case Study

Guilin Bank started working with MYbank in November 2015, using the latter’s AI, computing and risk management technologies to offer collateral-free small business loans to farmers. As of June 2018, Guilin Bank had issued a cumulative RMB 350 million (approximately USD 54 million) in small business loans to more than 20,000 farmers.

Neng Wang, Chairman of Guilin Bank said:

“The traditional brick-and-mortar banking model is inefficient, with high costs and complex risk management processes. We always wanted to provide inclusive financial services for SMEs and farmers, but due to technology constraints, we were only able to service a few large scale clients in rural China.”

“Ant Financial’s digital banking technologies helped us overcome the cost, efficiency, and risk barriers of SME financing, enabling us to service more clients in the rural market.”

This is the latest development by Ant Financial, where previously on June 19 2018, the company announced plans to share a full suite of artificial intelligence with asset management companies.

In May 2018, banks including Huaxia Bank, China Everbright Bank, Shanghai Pudong Development Bank, China CITIC Bank, and Bank of Tianjin signed strategic cooperation agreements with Ant Financial to support the banks’ digital transformations.