Malaysia Fintech Week 2019: WeBank explains the ABCDs of banking the unbankable

• Powered by the ABCD of fintech: AI, Blockchain, Cloud, Data
• Hit 100 million customers in 2018 with over 346 million transactions per day

"WHY are we doing digital banking?" asked Henry Ma, WeBank executive vice president, at the start of his talk during the June 17 to June 19 Malaysia Fintech Week, which was part of the wider Malaysian Tech Week 2019 in Kuala Lumpur. "Probably not because it is easy but because it is hard."

Despite the Kennedy-esque image of rising to meet some insurmountable challenge, the truth may be that WeBank has already made its moonshot by offering services to the underbanked and unbanked community, while making a healthy profit.

Even Ma admits they are now "at par with a lot of the big banks", having reached 100 million customers in 2018 with over 346 million transactions per day (in comparison ICBC, China's largest bank, conducts more than 500 million transactions per day).

They have an estimated US$29 billion (RMB200 billion, approx RM120 billion) worth of assets, with net profits of US$359 million (RMB2.47 billion, approx RM1.5 billion).

The community they serve are those not normally targeted by banks. Instead of the high-net worth individuals, about 75% of WeBank's customers are blue-collared workers. Instead of billion-dollar agreements, their average loan size is US$1,178 (RMB8,100, approx RM4,900), and interest of 72% of those loans is less than US$14.54 (RMB100, approx RM60).

"When you talk to traditional bankers and show them these types of numbers... most of them will just walk away because that is not the kind of business that will be sustainable," said Ma.

As easy as ABCD

When you're backed by Internet giant Tencent, it's going to be a pretty impressive technology platform. Ma referred to the enabling ABCDs of Fintech: Artificial Intellegence, Blockchain, Cloud Computing and Data.

"Any of those technologies that we apply has to either increase the operational efficiency, improve our customer experience, enable us to scale up or be able to cut down costs," he explained.

For example, Ma said that conventional banks in China have an IT operation cost of anywhere between US$2.91 and US$14.54 (RMB20 and RMB100, approx between RM12 to RM60) per account per year. WeBank leverages on cloud computing to bring that number down to US$0.52 (RMB3.60, RM2.18) per account per year.

Artificial intelligence has been harnessed to both help interact with customers (through the use of chatbots), implement security (facial recognition) and together with Big Data, make business decisions. As an example Ma explained how they can determine the credit profile of a customer by processing up to 100,000 parameters.

Another improvement in efficiency is to use blockchain to improve transparency and speed up decision making with their partners by putting a shared ledger on a blockchain network. As a result, they can do real-time reconciliation, instead of taking the usual one or two days. Blockchains also help improve disputes because they share their data with their arbitrators, processing disputes in days instead of weeks or even months.

Reaching out to the unbankable

WeBank has certainly been catching the attention of the financial community. Later in the day during a roundtable, Chris Skinner, who runs The Finanser and comments on fintech, had praise for WeBank, as well their rival MyBank. "In a physical distribution model we couldn't service people who earn only a thousand dollars a month," he said. "Now we can."

Skinner credits digitisation for the drop in unbanked or underbanked people from four and a half billion to two billion in only a decade.

In fact, Skinner also sees Internet banks reaching out to this previously untapped market as the way for fintech companies to truly compete against established big banks.

"Running a banking business versus promoting financial inclusion could be very contradicting ideas, but at least at WeBank we demonstrate it is possible," concluded Ma.

“If we can do it in China, we strongly believe somewhere someone in the world will be able to figure out the same way,” Ma said, making the point that even if it’s hard, it’s still very much possible.