The 4-year-old bank uses real-time payments data and a risk-management system that analyzes more than 3,000 variables to allow borrowers to apply for a loan on a smartphone and receive cash almost instantly if approved. The whole process takes three minutes.
So far MYbank has lent 2 trillion yuan ($290 billion) to nearly 16 million small companies, with a default rate of only about 1 percent.
The fact that MYbank and its peers have become more comfortable with smaller borrowers could be a positive sign for China’s economy. Non-state firms — mostly small businesses — make up about 60 percent of growth and employ 80 percent of workers.
“Small and medium enterprises are really the boiler room of the economy,” said Keith Pogson, a senior partner in charge of banking and capital markets at Ernst & Young LLP in Hong Kong, according to Bloomberg. “It used to be a segment that banks thought was too difficult and too risky. But now they run their model and work out what the risks are so they feel more comfortable.”
Other lenders in China are also boosting their SMB loan offerings. The nation’s second-largest lender launched a mobile app in September that can process loan applications for as much as 5 million yuan ($727,000) in two minutes, while Construction Bank increased its small-business lending by 51 percent last year, more than twice as fast as the industry, with defaults at just 0.3 percent. And units of Tencent Holdings and Ping An Insurance Group are both offering services similar to MYbank.
“It’s a profitable business as long as you can keep the risks in check,” said Zhang Gengsheng, a vice president at Construction Bank in Beijing. “We had suffered huge losses in the past with a bad-loan ratio running at 8 percent. But now we’re back in the game.”