Case Study

The Consumer Finance Product of the Year – CMB Flash Loan

By Gerald Tai

Flash Loan 2.0 was launched, designed to increase the user-friendliness of the app, condense selling points and update risk management systems, allowing the app to review 100,000 applications per day

Digital finance has been rapidly expanding in the past years. Many new concepts have emerged, such as third-party payment, online loans, crowdfunding and online wealth management. In 2016, the People’s Bank of China and China Banking Regulatory Commission issued the Guidance on Improving Financial Support to New Consumption Areas, accelerating innovation in consumer credit management and product innovation, and improving and optimizing the development environment for consumer finance.

In 2015, China Merchants Bank (CMB) adopted the motto "Mobile First". Under the strategy, CMB developed a new product – Flash Loan. Flash Loan is a revolving credit loan platform built on the CMB mobile app, serving diverse customer segments ranging from young individuals to industrial supply chain customers. Flash Loan enables customers to apply online 24/7 and have their loans approved within 60 seconds. The platform provides customers with differentiated credit lines and interest rates. In May 2017, Flash Loan 2.0 was launched, designed to increase the user-friendliness of the app, condense selling points and update risk management systems, allowing the app to review 100,000 applications per day. Looking forward, Flash Loan will expand its product offerings with hypothecated loans, guarantor loans and loans for diverse customer bases.

Several product innovations built up Flash Loan. CMB uses multiple anti-fraud systems on their mobile app. These anti-fraud methods include facial recognition, text message verification codes, SSL encryption, and IP Address tracking. Flash Loan uses a legally valid digital signature to secure the application process. To safely manage risk, Flash Loan will expand the use of AI and machine learning algorithms in its application process. Additionally, CMB will collaborate with external tech companies to improve its risk-rating and early-warning models. These components establish a full-chain risk management system. The bank works with 20 external data providers and customer channels to provide information for Flash Loan’s intelligent customer service system. The system provides unified credit score granting, dynamic credit adjustment and intelligent pricing; it automatically assigns a credit score to customers, changes the score based on their activity, and assigns appropriate loan prices. In 2018, a comprehensive customer feedback monitoring system will be added.

Flash Loan’s revenue contribution is 5% of total revenue generation for CMB's retail banking business. Flash Loan has a revenue generation ratio that is more than double of CMB’s offline loan products. In 2017, Flash Loan acquired 700 thousand new customers, a YOY growth of 589.6%. At the end of 2017, Flash Loan had a loan balance totaling approximately $5.33 billion (RMB34.7 billion), 8.5 times greater than the close of FY2015. The non-performing loan ratio is within 0.3%. The annual economic value added by Flash Loan increased by 108% YOY. Its new pre-approved loan products total $92 billion (RMB600 billion), covering 13 million customers.



Keywords: Technology
Institution: China Merchants Bank, PBOC, China Banking Regulatory Commission
Country: China
Region: East Asia
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