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Aug 11, 2020 10:02 pm · SEC

OneConnect Issues 16.5 Million ADSs

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Aug 11, 2020 03:10 am · 36Kr

Keyike Closes Series A of Financing

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Aug 9, 2020 01:42 pm · 360 DigiTech

Qihoo 360 Rebrands its Financial Services Arm into 360 DigiTech

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Aug 7, 2020 01:07 am · Sina

Ant Group Chooses CICC as Sponsor for its IPO

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Analysis EO
Analysis · 2
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Analysis EO
Aug 4, 2020 01:02 am ·

Tencent's WeBank: A Tech-Driven Bank or a Licensed Fintech?

►Individual lending platforms WeiLiDai, Xiao'e Huaqian, and WeiYeDai, which primarily target small businesses, are the three main components of WeBank’s product mix.  ►The company capitalizes on AI, Blockchain, Cloud Computing and Big Data to advocate for inclusive finance, which was its original intention.  Among Chinese banks, WeBank wears the most garlands – it ranks as the first online bank worldwide, the largest banking unicorn globally, the first private bank nationally, the first Chinese digital bank rated by Moody’s and S&P… So, what on earth is this company? The ‘new banks’ shouldn’t be just upgraded traditional banks – they are supposed to be an entirely new model, built from scratch to satisfy the fluctuating needs of a digital era. That was exactly how WeBank, the originator of developed online banking, was established. Tencent-owned, it was founded with the mission of providing ‘inclusive finance,’ targeting unbanked and underbanked individuals and SMEs, while capitalizing on its technology advantages. After five years of deployment, it has developed clear business models and taken its steps towards a relatively stable stage.  Making a mark on ‘inclusive finance’  WeiLiDai (Chinese:微粒贷 - ‘particulate loan’), a purely online lending platform, launched first. With the launch button clicked in 2015 by Li Keqiang, the Prime Minister of China, the first loan was sent. The online credit services reformed the lending business in the banking sector, significantly expanding the pool of consumers and increasing borrowing efficiency. Now it has become one of the most popular consumer finance products to focus on microcredit in China, making solid progress on its track towards achieving the goal of scaled inclusive finance.  Targeting those in the population with below-average income and with less or no borrowing records, WeBank is designed with the simplest operation patterns – it has minimal buttons, making it very friendly to users. These advantages, along with its cheap borrowing fees, allowed WeiLiDai to win the market very quickly. At the end of October in 2015, WeiLiDai had already given credit to over 10 million people with the transaction amounts reaching to over CNY 7 billion. The revenue of the company has grown steadily from 2016, and total assets and total lending are growing fast as well.  Now, the average lending amount is around CNY 8,000, with an average borrowing period of 52 days. More than 70% of the clients paid interest less than CNY 100, over 8.2 million users had no credit on book before. The accumulated lending reached CNY 3.7 trillion and the number exceeded 460 million. The company did achieve its intention of solving the imbalance in financial supply by providing more momentum to the low-tier population, then promote the entire financial industry in servicing more population.  Another product, WeiYeDai (Chinese:微业贷 – ‘small-business loan’), debuted in 2017, intended to boost entrepreneurship in China. Among clients, 66% had never borrowed money; this provided job opportunities to more than 2 million people. 64% of the businesses have revenue less than CNY 5 million, with an average employee roster of ten people and an average lending amount of CNY 0.2 million. At the end of 2019, the platform has provided credit services for over 230,000 small businesses, 3.4 times larger than last year, and the total lending amount increased 2.5 times to CNY 180 billion.  Unlike WeiLiDai, which is supported by the WeChat ecosystem, WeBank and licensed financial institutions co-launched Xiao’e Huaqian (Chinese: 小鹅花钱 – ‘gosling spending’) based on Tencent Video’s traffic in 2019, which is the second product to focus on the individual consumer finance field. The product links to the membership of Tencent Video, with the banking accounts opened with WeBank and the lending services provided by the third party.  In risk management, WeBank has introduced more than 30 kinds of data sources, including business and individual credit records, and Tencent-owned databases.  A technology company with banking licenses In achieving a sustainable business, WeBank actively leverages the power of technology and innovation.  WeBank doesn’t so much serve as a bank with technology advantages as a technology company with banking licenses. In 2019, its patent application numbers ranked first among all banks worldwide, recording 632 in total, even surpassing some global banking giants such as Bank of China, Bank of America, JPMorgan Chase, and Goldman Sachs. The patents are centered around AI, Blockchain, Cloud Computing and Big Data (ABCD). So how does WeBank use its technology advantages? Unlike traditional banks that use the ‘IOE’ system to support their products, i.e. IBM, Oracle and EMC, WeBank has used the de-IOE system from the very beginning. The IOE structure is based on centralized and closed-source systems, which means higher costs and private sources with security issues. The De-IOE system, on the other hand, has an IT maintenance cost that is 900% lower than the traditional banks. The use of the open de-IOE system enables WeBank to expand its transaction scales fast and securely.  What is more, In 2018, the company launched the ‘WeBank Fintech’ platform to promote its open banking ecosystem. Empowered by its advantages in ‘ABCD’, WeBank demanded a ‘Three Opens’ strategy the following year to decode the open baking ecosystem. The strategy seeks to center on banks themselves and to then expand to the business partnerships, and finally to establish an ecosystem by technology. The first step will be opening the platform. By sharing data models and algorithms, non-financial companies can provide financial services to the public. The second step is opening innovation, which means WeBank can open its technical capacities to help more business partners, reduce its cooperation threshold, and therefore construct a shared business infrastructure. The last step will be the open collaboration that further promotes partnerships to build business alliances and ecosystems. Banking everywhere – but never at a bank. In this new era, open banks are fueling the transformations, and that is exactly what WeBank wants to stand for.  In the next article, we will discuss how the market is going and how WeBank is performing among players.

Analysis EO
Analysis · 2
report
Analysis EO
Aug 4, 2020 12:59 am ·

WeBank and a Changing Chinese Banking Sector

►WeBank and MyBank account for nearly 50% of the entire asset pool in China’s private banking sector. ►Credit risks from both banks in the management side and from borrowers in the fund usage side provide certain concerns on the future of private banks.  In the previous article, we drew a sketch of WeBank’s business. Here, we outline the full picture of China’s entire banking market and the company’s position within it.  Within only five years, WeBank, a private online bank, has seen its profitability rise to the second-league level among the public urban commercial banks in China, with a net income ranging between CNY 5 to 10 billion.  In 2019, WeBank posted the revenue of CNY 14.87 billion with an increase of 48.26%, the net income reported grew by 59.66% to CNY 3.95 billion. The performances also ranked first among all the private banks.  The total assets reached nearly CNY 300 billion, and the loan balance achieved CNY 163 billion, with increases of 32% and 36% respectively. The figures have surpassed several public urban commercial banks in China.  At the end of 2019, WeBank had served over 200 million individuals and 900,000 of businesses, significantly overrunning the figure of 100 million and 340,000 in 2018. The loan balance coming from small businesses also jumped up twice, marking a more balanced income structure.  As a young and 100% internet bank, it cares more about risk management than traditional banks because of the vulnerable nature of microloan. To be more conservative, WeBank became the first to adjust its standards in measuring nonperforming debt, with used loans 60 days past due instead of 90 days to calculate the ratio. In 2019, the ratio was 1.23%, increasing from 0.36% in 2018. Compared to the average bad loan ratio for commercial banks in China of 1.86% in 2019 under the 90 days due to standard that released by China Banking and Insurance Regulatory Commission (CBIRC), WeBank performed much better. What is more, according to CBIRC, the loan coverage ratio for the lending from financial institutions nationally to small and medium businesses (SMBs) with an amount of less than CNY 10 million posted 5.9%.  WeBank is leading the private bank segment Starting with the establishment of WeBank, more private banks evolved with the businesses focus on ‘new’ fields. Now, there are 19 ‘new banks’ in the Chinese banking industry with high industry concentration. The total assets among these private banks range from less CNY 5 billion to nearly 300 billion, the net income also low to negative figures and high to near CNY 4 billion.  MyBank, an Alibaba-backed online bank with a focus on small business loans, together with WeBank to count almost 50% of the entire private banking sector based on the total asset scale. My Bank posted net income of CNY 1.26 billion, largely increased by 90.88% from 2018, ranked second in the industry. However, the profit of WeBank is over three times higher than MyBank, and even recorded near five times the total figure from the rest of the banks.  Wide gaps exist between the rest of the banks and the first two giants. XWBank, performed outstanding among them, posted net income of CNY 1.1 billion in 2019 close to MyBank with the only one-third of latter revenue. Fumin Bank, Sanxiang Bank, and Yillion Bank reported a net income growth over 100% in 2019.  The individual client number of WeBank defeated others by a wide margin. WeBank has clients over 200 million on the to-C side in 2019, followed by XWBank of 31 million and Sanxiang Bank of 2.68 million. As for to-B business, MyBank is the leader, which has offered credit services to 20.9 million SMBs, significantly surpassing the figure of 0.9 million of WeBank. What is more, all banks have a certain emphasis on technology reflected as the technician numbers, accounting for around 50% of the total employees. Among them, WeBank, MyBank and XWBank are above the level, with the ratios of 60% (said near 60% in the annual report with no specific number disclosed), 52.2% and 50.7%, respectively.  As mentioned, the private bank sector in China concludes all the ‘new banks,’ targeting both individuals and SMBs. WeBank, MyBank and XWBank and Zhongbang Bank are four online banks, with MyBank mainly providing services to businesses and the rest of them focus on individuals. Suning Bank defines itself as an O2O bank, backed by the large consuming ecosystem of Suning with a large emphasis on consumer finance and supply chain finance fields. The two new private banks that were established in 2019, Yumin Bank and XiShang Bank position themselves as a ‘5G bank’and an ‘IoT bank,’ respectively.  Future of the ‘new banks’: risk management is the first priority There are 19 private banks now in China with the total assets scaled to CNY 900 billion at the end of 2019, up by 41.2% from in 2018’s CNY 637 billion. The total net income reported CNY 1.97 billion in 2017, rising fourfold to 8.2 billion in 2019. The sector is growing at a rapid speed. Even with different positions, all private banks have the same mission, which is to bring credit services to unbanked individuals and SMBs with technology solutions and reach scaled inclusive finance in China. Around 40% of adults in China that have no personal loan in the consumer finance field, which is also the main market these banks are competing for. They have a bright future and a near-infinite market ceiling.  However, while a crucial part of transforming the entire banking industry, they only account for less than 0.5% of the entire assets of the latter. It’s still a massive undertaking to develop stronger services. What is more important, with limited time of operation, many potential risks associated haven’t been revealed.  Private banks are facing difficulties in attracting deposits because of zero-branches and limited public trusts. Many of them scaled up their debts by issuing large amounts of certificates of deposit (CDs) and some innovative products, which pushed them back to the business of traditional banks. In the future, private banks should insist on the ‘light asset’ model and explore the fields that haven’t been deployed by the traditional banks.  What is more, online credit services have high risks. Though the nonperforming loan ratio is still at a very low level, it is poised to eventually rise because of the low amount of the loans and the easy approval processes.  In 2019, the ratios for Yillion Bank and Zhenxing Bank, the two names with the highest growth rate in the segment, both jumped up from zero to over 1%, which should’ve alarmed the entire sector. In the first quarter of 2020, the nonperforming loan ratio of the entire sector ran up by 0.46% to 1.14%. Furthermore, many individuals borrow money for investment, which further increases the credit risk.  Other concerns center on the information leak and the instability in the management team among private banks.  All in all, there is still a long journey ahead.

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Jul 27, 2020 04:33 pm · Sina

Ping An Technology Assigns New General Manager

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Jul 27, 2020 12:09 pm ·

Huawei Applies for DLT and Blockchain Patents

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Jul 22, 2020 12:38 am · eastmoney

ZhongAn First Introduces Noseprint Recognition on Pet Insurance

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Jul 22, 2020 12:31 am · cnstock

Futu Securities' Clients Surpass 1 Million

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