Smaller banks seek partners to take up the technology challenge

Smaller banks in China are searching for tie-ups with fintechs and other large institutions including banks to foster technological development and improve customer provision

As the concept of open banking seeps its way into the financial mainstream, smaller banks are looking to benefit from greater opportunities that spawn from collaboration with fintech providers.

Smaller banks are considered by many industry insiders to be less competitive in technology compared to large banks and technology players. A key factor holding back small banks from developing their own technology projects internally is its cost-prohibitive nature. Therefore, technology companies and large banks make ideal partners for small banks who seek to upgrade their system or expand their business.  

“Sometimes they (smaller banks) don't know what they want, because they don't know what they don't have. They don’t know what's wrong with their traditional long process,” says Emma Wang, chief growth officer at OneConnect, a technology company under the Ping An Group.

“Chinese city commercial banks have some apparent weaknesses in technology, operations and management. In the era of big data, how technology is able to improve business models and management philosophy is what technology companies can help us with,” says a head of personal banking at a Sichuan-based local bank in China.  

As banks continue to shift their loan application process from offline to online to further expand business, the need to utilize data analytics and fully understand the customer has grown significantly among smaller banks.

Risk management is a major focus of fintech companies such as Rong 360 and OneConnect. With copious quantities of customer data, fintech companies are better able to analyze customer behaviour within different customer segments and help smaller banks with risk assessment as well as marketing activities. 

 “Our main business is SMEs and consumer loans. In a traditional model, we do the verification offline. Everything is manual and it is very inefficient,” says head of risk control at an Inner Mongolia-based local bank. 

In a bid to improve efficiency for financial institutions, fintech companies have come up with solutions leveraging AI, big data, and biotech technology in the loan application process. The Ping An Group's OneConnect has developed a form of microexpression technology through which banks are able to detect fraud. A microexpression is a brief, involuntary facial expression that appears on a person's face according to emotions. This machine can capture microexpression change and tell whether the applicant is telling truth.

“One of the fundamental ideas behind developing microexpression technology was really inspired by knowing and finding out a huge common pain point of smaller banks,” says Wang.

 

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