Zhou Jing, the president of Pintec Technology Holdings Limited (“PINTEC”) (Nasdaq: PT), a leading independent technology platform enabling financial services in China, laid out her vision on Monday for how to drive financial inclusion globally, which will require providing financial products and services to meet the needs of individuals and businesses in a responsible and sustainable way.
Today there are approximately 2 billion adults globally, or almost a third of the world’s population, who do not have access to formal financial services, Zhou said in an address to the Banking Tech North Africa conference in Cairo, Egypt. The drive for the financial inclusion of this group that is currently under-served by traditional financial institutions must focus on three key areas: a recognition of millennials as the financial force of tomorrow; financial access that can overcome geographic challenges; and a new approach to financing micro, small, and medium-sized enterprises, she said.
Millennials will be the major revenue contributor to financial institutions by 2030, according to a study by Barclays. So understanding this generation, which has a limited financial history available, is a crucial first step, Zhou said. This tech savvy group is willing to adopt new technologies, and often learns about financial products and services through social media. This generation’s mobile-centric and digitally connected lifestyle leaves a large online footprint, providing alternative data that may offer financial insights into borrowers, she said.
Geographical dispersion presents another big opportunity and challenge for financial inclusion, as distribution of traditional financial services has often been uneven, Zhou said. For example, according to a report by Bank Indonesia, 74 percent of commercial bank outlets in Indonesia are on just two islands, Java and Sumatra. Indonesia is, however, a nation of 17,000 islands, leaving residents elsewhere largely underserved. Digital financial services can help bridge this kind of geographical gap, Zhou said.
Likewise, a lack of financing for small businesses has vexed policy makers around the globe for years. There have been many constraints on such financing including lack of financial transparency; scarce collateral; high cost of origination; weak financial infrastructure; and inadequate data.
The solution to each of these challenges, and to helping institutions to drive financial inclusion and enjoy exponential growth, is the adoption of next-generation credit assessment built on smarter data, and simpler credit, Zhou said. This involves alternative data, intelligent credit processing and a flexible IT infrastructure, she said.
Smarter data means financial institutions must begin to use alternative information to augment their traditional data. Many forms of alternative data are available to provide insights into borrowers, Zhou said. These include e-commerce data, such as transaction history and spending behavior; payment platform data, such as cash inflows/outflows, and tax payments; rent and utility records, and many others.
By using such forms of alternative data, Oliver Wyman estimates 20%-30% of the unbanked population may become scoreable, Zhou said. A key consideration here, however, is whether financial institutions can obtain both regulatory and customer approval for using alternative data to assess credit and, if so, what usage of data is legal and acceptable.
Any new credit assessment process must also be focused on providing simpler credit, Zhou said. This means tailoring the process for convenience and speed to deliver an instant credit assessment with approve/decline decisions in real time, along with risk-based pricing, and credit limit calculation, she said.
Since its founding, PINTEC has been focused on using technology to drive financial inclusion in China. The company uses technology to enable companies to offer financial products to their customers efficiently and effectively, while connecting 86 financial partners with PINTEC’s end users, and those of its 186 business partners. From inception through Sept. 30, 2018, PINTEC has recorded 27.9 million cumulative registered users; a cumulative loan outstanding balance of RMB6.4 billion; and a cumulative wealth management transaction amount of RMB 5.5 billion.
The positive experience of PINTEC in the competitive China market demonstrates that, working together, banks, governments and technology companies have it within their power to solve the problem of financial inclusion today.
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PINTEC is a leading independent technology platform enabling financial services in China. With its mission to “Power the Future of Finance”, PINTEC aims to advance financial services by providing customizable and modular fintech solutions to its financial and business partners. In fields such as online travel, e-commerce, telecommunications, online education, SaaS Platforms, financial technology, internet search, and online classifieds and listings, PINTEC enables financial services for institutional partners with point-of-sale financing solutions, personal installment loan solutions, business installment loan solutions, wealth management solutions and insurance solutions. PINTEC’s services include: consulting services, SaaS technology services and other value-added services. PINTEC has cooperated with a number of business partners and financial partners, including without limitation Xiaomi, Qunar, Ctrip, China Telecom BestPay, Vip.com, shouqianba.com, Minsheng Securities, Orient Securities, Yunnan Trust, Guoyuan Securities, China National Investment & Guaranty Corporation, Fullerton Financial Holdings. PINTEC has launched two joint ventures to serve the Southeast Asian market: Avatec.ai (S) Pte. Ltd, formed in 2018 to offer credit assessment services and solutions, while PIVOT Fintech Pte. Ltd (“PIVOT”), formed in 2017 to provide robo-advisory services. On October 25, 2018, PINTEC was officially listed on the Nasdaq Global Market with American depositary shares trading under the symbol “PT”.
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