Ping An Bank achieves 28% three-year CAGR for its inclusive SME loan balance, serving more than 1 million MSME customers

Small and medium enterprises (SMEs) have played an increasingly important role in economic development in emerging countries in recent years. According to the World Bank, small enterprises account for the majority of businesses worldwide, making them important contributors to job creation and economic development. SMEs represent about 90% of businesses and offer more than 50% of jobs worldwide. Up to 40% of the gross domestic product (GDP) in emerging economies come from SMEs.The SME sector in China saw rapid growth in terms of total output in the last two decades. However, like SMEs in many countries, they are underserved by financial institutions (FIs) due to several hurdles. These include shortage of business data, lack of collateral, credit information asymmetry, and limitation in last-mile access. In 2021, SME access to bank financing in China remained low at around 16%.

Ping An Bank launched its micro, small, and medium enterprises (MSMEs) business in 2008, and over the past 14 years, remained focused on supporting the sustainable development of the businesses of inclusive customer groups through technological empowerment and customer-centred services.

Ping An Bank’s inclusive finance business achieves rapid growth

Since 2013, when China laid out a plan to advance its financial inclusion programme, significant progress was seen in the SME sector. Access to bank financing increased four-fold with outstanding SME loans increasing from RMB 11.6 trillion ($1.82 trillion) at the end of 2012 to RMB 58 trillion ($8.16 trillion) by the third quarter of 2022. Inclusive SME loans as a percentage of total SME loans increased from 24% at the beginning of 2019 to 40% by the third quarter of 2022.

Ping An Bank conceptualised the SMEs business based on its 3Cs, focusing on Convenient experience, Comprehensive service and Complete product lines. The bank implements a new Five-in-One retail model under which it continuously develops digital and online channels, enhancing its smart inclusive finance service capability, and providing lending services 24/7. At the same time, with the help of big data, artificial intelligence (AI), Internet of Things (IoT), and blockchain, the bank goes deep into supply chain scenarios and ecology. These initiatives supported the digital transformation and upgrades of exclusive SME loan products ‘Xin Wei Dai’ and continuously enhance the inclusive finance product lines including ‘Xin Yi Dai, ‘Zhai Di Dai’ and ‘Zhai Yi Dai’ which alleviated the difficulty of obtaining funds and trimmed the cost of financing for small businesses. From 2019 to 2021, the three-year compound annual growth rate of Ping An Bank’s inclusive SME loan balance reached 28%, three percentage points higher than the market average for joint-stock banks.

In 2022, the balance of Ping An Bank’s inclusive SME loans reached a new record, serving more than one million inclusive MSME customers, with the outstanding loan balance over RMB 500 billion ($71.4 billion). The market share of inclusive SME loans further increased from 1.7% in 2019 to 2.1% in the third quarter of 2022. The average account balance of the bank’s inclusive SME loan is only about RMB 450,000 ($64,285), with micro-to-small and individual business owners at the end of the industrial chain accounting for most. Non-collateral loans accounted for more than 24% of the bank’s inclusive SME loan balance. The business scale, growth rate and number of customers of SME businesses are at the forefront among joint-stock banks in China.

Chen, a board merchant in Linyi, Shandong, inspects a batch of newly-made boards in the warehouse

Leveraging big data to power products

China emerged as one of the key markets for financial technology and digital businesses. SMEs are transforming their business model towards e-commerce, embracing social media, and migrating their information infrastructure to the cloud. This process was accelerated by the onset of the Covid-19 pandemic. The transition created valuable data assets, from business operations to financial and non-financial behaviors that banks can leverage to better understand customers and manage credit risk.

Ping An Bank has always considered technology as its driving force for strategic transformation. Leveraging financial technology, the bank integrated various data sources into its big data platform, and built a strong risk control capability.

On the retail side, the bank built a retail risk data platform to accelerate structural transformation into a ‘cloud + big data’ platform. The bank integrated massive data points and established a data credit rating system to improve risk identification and anti-fraud capabilities. It utilised machine learning (ML), neural network and other algorithms for data collection and integration, and achieved accurate and dynamic measurement of customer credit risk and an intelligent post-loan risk alert.

Through the use of AI, a new model is implemented in the pre-screening of MSME customer groups. The bank, meanwhile, optimises the post-loan management model by establishing a post-loan online centralised operation platform to reduce the workload of customer managers.

On the corporate side, by building the Nebula IoT Platform, Ping An Bank leverages IoT equipment to legally and efficiently collect authorised business data from enterprises to understand their real business conditions. The bank unlocks the data value through modeling to help enhance creditability for enterprises. The encrypted data obtained through IoT devices is sent to the Nebula IoT Platform, where data governance and big data modeling are carried out. The platform enables the bank to widen financial inclusion while maintaining risk control.

Ping An Bank gives inclusive finance a human touch

Since the beginning of 2020, the pandemic has negatively impacted the real economy. For most MSMEs, financing difficulties have become more serious. During the pandemic, Ping An Bank launched the Xin Wei Dai product to help small business owners to make their loan applications online. Through the use of biometrics identification, big data, and AI, the bank realised complete online interaction with the tax bureau and continuously optimised the process and interface. The bank developed the multi-personal virtual verification process, which provides remote verification and recording services, creating a frictionless lending experience that allows customers to complete their self-service application in 10 minutes and facilitates loan disbursements in 10 seconds minimum.

While supporting the real economy and serving MSMEs, Ping An Bank has also implemented fee reduction and profit sharing to help MSME customers minimise costs and lighten their burden. By the end of September 2022, the bank had reduced or exempted payment and settlement fees amounting to over RMB 130 million ($18.6 million). Charges for self-selected items totalling some RMB 40 million ($5.7 million) were also waived, benefiting over 750,000 MSMEs and individual commercial households.