China’s fintech scene started late but trumps US, says Baidu’s fintech arm
“China’s fintech [scene] started late but grew at a faster rate [than America’s],” says CEO of Baidu’s Financial Services Group (FSG) business arm Du Xiaoman Financial, Zhu Guang.
The Chinese fintech, which uses artificial intelligence (AI) and big data to calculate short-term loans and investment services alongside the country’s financial institutions, talks to FinTech Futures about China’s global position in fintech and its developments in AI this year.
“China’s large population base, strong financial demand and rapid development of mobile payments [since 2013] determine that China has begun to move out of a different development path than the US,” says Guang, who notes that since the 2007-8 financial crisis the credit check process and the regulation requirements for technology have only “attracted increasing attention” in the US.
Expanding into the world of consumer finance in April 2019, a month later Du Xiaoman bought a 30% stake of northern Chinese licence-holding firm Harbin Bank Consumer Finance (HBCF).
Guang reasons that fintech companies must have their own “test fields”, able to incubate technical capabilities, polish them and then export them.
He confirms Baidu’s reason for becoming the first of China’s big four online giants – Alibaba, Tencent and JD.com being the others – to obtain a licence for consumer finance operations is just that: “Du Xiaoman’s investment is in order to gain ‘test fields’ for fintech.”
And now having worked with more than 60 banks to accumulate $7.1 billion in loans, Guang says Du Xiaoman is of the firm belief Asian big techs should be partners to the financial services industry, not their competition.
“In recent years, the relationship between high-tech companies and financial institutions has gradually transitioned from a competitive relationship to a win-win relationship,” says Guang. “Banks should not worry about the rise of fintechs but should consider how to jointly establish open and win-win partnerships to provide consumers with more trustworthy financial services.”
As part of one of the largest AI companies in the world – Baidu – and now the second-largest microcredit company in China with $1 billion in registered capital, Du Xiaoman’s CEO can speak with some authority on China’s AI developments.
“AI has entered the stage of large-scale application in China, such as in the fields of autonomous driving and smart home,” says Guang. “We believe that Robotic Process Automation (RPA) may be a hot spot in the market next year, including voice robots, whose technology has matured” to the point where Guang is confident it could be used efficiently for customer services and marketing among other fields.
Guang says Du Xiaoman uses robotic-powered customer service for chasing post-loan collections of overdue customers “in order to reduce [its] labor costs”.
But whilst the customer service capabilities of AI may already seem familiar, it’s proven they are still stalling companies’ efforts to remain personalised. Forrester’s 2019 research says 63% of customers will leave a company after just one poor experience with the iteration of chatbots companies use today.
The challenges which face AI are therefore equally as weighty as the benefits it can bring. With efficiency comes risk, says Guang, who calls the balance between the two “the biggest challenge”.
Whilst AI and big data can grant credit checks and approvals in just a few minutes as opposed to a few weeks, risk should ultimately come first and efficiency second, he says.
“The essence of finance is a risk. […] We should always take risk management as the core, and then solve the problem of efficiency”, says Guang.