'DIGITAL BANK' - LICENSING AND REGULATORY FRAMEWORK IN INDIA AND WAY FORWARD

Last 6 to 8 years have seen rapid development in 'Digital bank' across the world, and China is no exception. Digital banks have an entirely branchless digital service and the need for physical branches is replaced by non-stop, 24/7 customer service and automated systems.

- Suraj Kumar Shoundik

These Banks have been formed by large conglomerates like WeChat, Baidu, Xiomi, Ant group etc. that have huge customer base and all the ecosystems for a seamless expansion of fully Digital Bank. Few of the Digital Banks in China are - Ai Bank, MyBank, WeBank, XW Bank etc.

During the past few years, these Banks have made remarkable success in the field of business lending, agri lending, consumer lending, financial inclusions etc.

Success story of Digital Bank- China

MYBank or Zhejiang Network Merchants Bank Co, founded in 2015 is targeting mainly smaller firms, with about 80 percent having less than 10 employees.

Most of its MSE borrowers do not have established Banking relationships with traditional banks. Infact more than 70 percent are having difficulties in getting loans previously from any financial institutions. Its loans are generally of smaller ticket size, for shorter duration, and are used primarily for working capital purposes.

It established an online-only platform that enabled SMEs to open accounts and apply for loans quickly and easily, without the need for extensive paperwork or physical branches. Big data and AI were used to assess the creditworthiness of applicants, allowing for quicker and more accurate lending decisions. They used data of consumer repayment records from e-commerce platforms like Alibaba and Alipay, smartphone payment records, registered online customer profiles, e-commerce transactions, local government records, and insurance records to assess loan applications. 

It used '310' model , which included more than 100,000 risk profiling metrics and 100 credit risk models specifically suited to SME and individual lending.