Ping An Bank strengthens financial inclusion with Smart Banking 3.0

Ping An Bank aims to ameliorate road blocks to financial inclusion of underserved segments of the economy by marrying digital with human interaction to address customers’ pain points. Micro, small, and medium enterprises (MSMEs), new urban residents, and rural customers are the three most common groups that benefit from financial inclusion in China. Customers in these groups have unique pain points but also intersect in many scenarios.

Ping An Bank found that financial institutions (FIs) need to upgrade product design, simplify the process, and engage in its customers' operations to identify where their roadblocks arise. This will help FIs to discern how best to bring these customers into the mainstream so they can participate in the wider economy.

On the other hand, these customers urgently need to improve their financial and digital literacy as well in order to take the first step towards digital inclusion. Many lack sufficient credit data to meet the criteria for loans. They face higher prices for loans because of fewer assets, and have almost no credit history. Their level of literacy makes it challenging for them to go through an online, non-human process to access digital services, much less identify the most suitable products, or reap any of the benefits of digitalisation. 

With Smart Banking 3.0, launched in 2021, Ping An Bank aims to tackle issues such as scattered and diversified customer patterns, insufficient data for risk profiling, and the trend of digitalisation that further marginalises this segment of customers to ease them into the system.

Ping An Bank combines human interaction with digital technology

Ping An Bank is one of the frontrunners in digitalisation in China, now with the technology to create highy personalised services that meet marginalised customers at their comfort level, while also generating real value for them and expanding business opportunities with them.

Ping An Bank expanded services during the development of Smart Banking 3.0. Since 2022, ATO (artificial intelligence combined with remote and offline banking), personal banking and open banking have been integrated. ATO launched more than 4,000 scenarios serving more than 49 million customers, a year-on year (YoY) increase of 50%. Customer service capabilities also improved.

While designing inclusive products, Ping An Bank focused on particular difficulties faced by customers and created service modes to address them. For instance, new urban residents can now apply for loans online anytime and anywhere. The bank created a product called Zhaididai Quanguotong for loan applicants using an address that is different from where they live, a scenario commonly observed among new urban residents, which meant they could not qualify for loans before. 

In addition, Ping An Bank has a virtual ‘multi-person collegiate room’ where loan applications can be verified and contracts signed online by video with the customer.

Through discounts on loan pricing, Ping An Bank manages to provide affordable and personalised financial services to help lower borrowing costs. In 2022, the bank proposed a special funds transfer pricing (FTP) support project. Ping An Bank has also formulated a special FTP for small and medium-sized enterprises (SMEs): on top of general FTP reduction, another subsidy is given to SMEs to help with their post-COVID-19 recovery. The bank, seeing that rural customers also need support, offered a subsidy for inclusive agriculture-related loans.

By marrying digital and offline services, Ping An Bank humanised a digitalised environment that this segment may have trouble navigating, to offer flexible and convenient financial solutions in a way that customers can understand and be comfortable with.

Ping An Bank launched Smart Bank 3.0 with a management system driven by the headquarters’ AI Brain decision engine that can carry out intelligent matching, analysis, and precisely personalised services. This enables Ping An Bank to provide affordable and targeted products for its outlier customers, some as unique as the Guangdong fish breeders.

Ping An Bank went to Zhongshan in Guangdong Province to investigate the issues faced by the breeders of Cuirouhuan or ‘crispy-carp’. Although it is an iconic industry in Zhongshan, the Cuirouhuan industry faces frequent financing difficulties. Ping An Bank found that these breeders generally have a longer capital turnaround and are often prone to liquidity shortage.

When seeking financing, most breeders do not trust online loan channels and lack the cash flow, financial statements, or collateral assets required for a traditional application. They often choose to sell a portion of Cuirouhuan in advance in exchange for liquidity at hand, which leads to lower-than-expected revenue.

To solve this problem, Ping An Bank, based on field research and risk assessment, customised a special credit extension plan for the breeders, providing a more flexible method of asset and income identification. The plan eliminated the need to show a cash-flow statement. Asset certification is based on individual credit and verified with an on-site visit.

In this way, Ping An was able to solve the financing difficulties the breeders have traditionally faced, and the inevitable losses they kept incurring, simply because they remained outside of the banking process.

A common feature among underserved customers is that they are often unfamiliar and skeptical about financial services. They tend to have incomplete knowledge about finance and this prevents them from solving their financial difficulties. Ping An takes a long view with its clients, especially those with uncommon difficulties, and is able to creatively address them through education, and flexible options that the client is able to accept.

Rapid growth in customer base, credit balance, and market share

As of October 2022, Ping An Bank has served over one million SMEs, with SME loans exceeding RMB 500 billion ($72.6 billion), taking its financial inclusive services to a new level. From 2019 to 2021, the three-year average compound annual growth rate of its inclusive loan balance reached 28%, three percentage points higher than for average joint-stock banks.

Wang Ronghui, president of the retail credit business and financial inclusion at the bank, said that along with the retail transformation of Ping An Bank, the digital and smart transformation of underserved customers have achieved remarkable results, and with that the bank’s ability to support and serve the real economy has improved considerably.

Financial inclusion in China has entered a new stage now where everyone is connected through digital devices. Instead of just deposits and loans, Ping An Bank plans to further expand its scope of inclusive products and tap into insurance, wealth management, and so on, in order to dive deeper into areas where the bank may be of tangible service to underserved segments of the economy.

Technology does not generate a benefit on its own; it still needs the bank to humanise product design and to offer concrete, innovative value propositions.