#41-Digital First & Wholesale Banks in ASEAN: SME’s need MyBank’s 310 lending model and Square Capital kind Customized loans
The ASEAN opportunity
Over 90% of businesses in ASEAN are SME businesses and they employ close to 140 million people out of the 640 million total population.
The SME’s have fixed and working capital requirements to run their business. Traditional banks lending application process for SME has been so complex, and full of pain points, that most of the SME’s do not even qualify.
MYBank is winning
Jack Ma’s MYbank has lent 2 trillion yuan (S$398 billion) to nearly 16 million small companies.
China has 73 million SME businesses thus the ocean is big. Regulations have been hardening, but the model is still very favorable.
What Technologies does MYBANK use?
MYBank uses real-time payments data and a risk-management system that instantly checks more than 3,000 variables AI/ML for Creditworthiness and Fraud risks
The SME’s have to give access to the books/transaction data.
What is 310-Lending MODEL- Why it Win’s?
- Mobile-first: Borrowers apply with a few taps on a smartphone and receive cash almost instantly if they are approved.
- 3 minutes approval- The whole process takes 3 minutes and
- No Human or Banker interaction: The SME lending application involves zero human bankers.
- Low Risk/ Default rate-The average NPL for SME loans in China was 2.75%, according to the PBOC (Central bank of China). The default rate so far — about 1 %.
Advantage SEA (Shopee) Group- Digital Full Bank
Shopee is a leading e-commerce player in the region and has been onboarding millions of SME merchants on its e-commerce platform.
Being an e-commerce player it can win in a big way on the Digital First Bank opportunity.
Chinese regulators have asked ANT group to focus on core payments business, thus while they have received the license of wholesale banking the strategic path in SG is yet to be designed.
The strong presence of SEA group across SEA merchant’s ecosystem and their transaction data is a big advantage that must be capitalized.
Digital-only banks/Neo banks will be getting stronger in the near future. Bank Branches are no longer an asset for the Banks. Branchless Banking is the future of banking in the post-pandemic world.
Personalized Loan at Cheaper interest rates for required duration
Lending products like 310 lending couple with Square Capital/Amazon Lending personalized to the merchant requirement will be the key differentiator for Digital first banks.
Regards,
Sidhartha Sharma
Digital Strategy and Fintech expert
Views are personal
