Around the world, the financial services industry has historically underserved or even excluded millions of consumers and SMBs (small- and medium-sized businesses) that are not considered profitable customer segments. Still today, large numbers of people and businesses do not rely on banks to help them meet their day-to-day financial needs. But you know how the story goes: Where there’s a need, there’s now a fintech startup ready to innovate fast and furiously to serve those unmet needs at a fraction of the cost. And as the market changes rapidly, more and more financial services firms are considering adding financial inclusion as an item to their agenda.

A Wind Of Change Is Blowing Through China

China is well known as an innovation powerhouse for fintech and mobile payments. Home to four of the world’s top 10 fintechs – AKA the BATJ (Baidu, Alibaba, Tencent, and JD.com) – China is the new frontier for fintech innovations.

Despite this, gaps remain in its digital banking history. Although China is the world’s second-largest economy and has four of the five largest banks in terms of assets, it still has the world’s largest unbanked population: 225 million Chinese adults currently lack a bank account. Small- and medium-sized businesses also find it difficult to get access to financing, which forces them to turn to shadow banks or alternative sources of funding.

Back in December 2014, Tencent launched WeBank to address the gap it identified in China’s banking market, with the vision to provide “affordable, accessible, appropriate, and sustainable” services for consumers and businesses whose financial needs are not met by incumbent banks. WeBank leveraged Tencent’s ecosystem, technology capabilities, and R&D resources to develop a disruptive credit profiling system and a new digital proposition that could scale up rapidly and sustainably and generate healthy profits while driving financial inclusion.

Today, WeBank offers microloans to consumers through Weilidai and lets WeChat Pay users apply for a Weilidai microloan directly from the WeChat Pay app. WeBank also serves SMBs through its Weiyedai product.

As Henry Ma, EVP and CIO at WeBank, told us, “WeBank is powered by the ABCD of fintech: AI, blockchain, cloud, and data.” WeBank combines a multitude of modern technologies to provide the foundation for a forward-looking banking platform architecture that includes cloud, microservices, open technologies, open source databases, powerful embedded analytics, and AI — all of which helps the digital bank increase operational efficiency, reduce costs, and scale faster.

WeBank’s innovative lending product added a powerful financial solution to Tencent’s payment service portfolio, enabling it to become one of the strongest players in the Chinese financial services market. Even by China’s standards, WeBank’s growth has been incredibly rapid, far outpacing the performance of traditional banks. Today, the digital bank profitably serves more than 100 million previously underserved customers and processes more than 300 million transactions per day.

What It Means

Financial inclusion is a billion-customer-plus opportunity that many traditional banks neglect or fail to grasp.

To successfully drive financial inclusion at scale, digital business strategy professionals at banks need to evolve their business model and embrace digital technologies to:

  • Offer simple and more personalized solutions that meet customers’ financial needs at an affordable cost.
  • Reach more customers at a lower cost.
  • Explore alternative data sources and develop innovative underwriting and credit profiling techniques.

If you are interested in learning more about WeBank, please take a look at the recent case study my colleague Meng Liu and I published: “Case Study: How WeBank Became The World’s Leading Digital Bank.” And if you’d like to discuss further, feel free to reach out to us and set up an inquiry by emailing inquiry@forrester.com.