The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian

Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI
does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use.
Terminology used may not necessarily be consistent with ADB official terms.

Digital inclusive finance:

the future that is happening

Luohan Academy
Long Chen

November 2019
 What is good finance?
• Financial Service becomes a key role in eliminating poverty and promoting inclusive,
sustainable development.

• UN definition:“…universal access, at a reasonable cost, to a wide range of financial services, provided by a

variety of sound and sustainable institutions.”

普
可得性 全
ACCESSIBILITY
服务全面
WIDE RANGE
惠
可负担
AFFORDABILITY
可持续
商业可持续性
SUSTAINABILITY
The first challenge of finance: typical 20-80 rule

In developing
countries

2 billion 10% 21%

2 billion people without bank
account
Among those with financing
Only 10% have credit
needs, only 21% get loans
card
from formal FIs

In China

72%
72% of adults lack
35% 23%
Traditional credit reporting Loans in rural area
basic financial system account for 23%
knowledge of total loan balance
The second challenge: finance does not focus on
serving the real economy
How can digital technology make a difference?
 DT has unprecendented speed of adoption and penetration
+ information is digitized
• 8 in 10 people in the developing world own cell phones (World Bank) ;
• 70% of the bottom 5th percentile of the population own cellphones (World Bank)

Speed of digital technology penetration WEF:

in the United States By 2022, 60% of global GDP will be digitized.

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 Emerging markets have shown much higher enthusiasm for digital
technologies + available services are lagging behind

Relationship between acceptance of mobile payment Number of people (millions) who lack access to a
and GDP per capita, 2017 transaction account (a bank or comparable account)
world wide, 2017

7
 What does digital technology exactly do?

Lower Cost Core Value of Digital Increase Efficiency

Technology

Connect, smart, and trust

Mobile Internet Artificial Cloud

Big Data Biometrics BlockChain
And IoT Intelligence Computing

8
 Digital penetration is much less dependent on the level of economic
development: China is transforming itself fast into a digital economy

Share of e-commerce out of total retail sales Mobile payment amount

(percent)
25
China South Korea United Kingdom
Asia Pacific North America World

20

15

10

0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
 Not only more inclusive, but also safer mobile payment

Real-time assessment: big data + biometric technique

Fraud loss rate

International
Alipay Payment Institution

< 0.0001% > 0.2%

Account security insurance covers account loss up to
RMB 1 million and average premium is only
RMB 1.6 yuan.

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Account insurance: Alipay vs traditional cards
 And most affordable mobile payment

US China

Acquisition
1%-3% 0-0.6%

US M-Pesa China

>1% > 2% 0%
Transfer

12
 Mobile payment is changing mom-and-pop groceries and even the
beggar industry

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 Digital inclusive finance
Nobel Prize winner Bent Holmström: “Information is the new collateral!”

SME

>20 mm

Rural Users Loan balance

>2.5 mm <30,000 RMB
Customer
experience

“310”
Credit Traditional
loan cost cost

2.3 RMB 2000 RMB

per transaction per transaction

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 Coordination of finance and business: The ability to obtain
financing has had a significant, positive impact on the growth of
sales for small enterprises

15
How to build the largest mutual aid insurance group
within a year

Low threshold Wide coverage

Covers
Free entry
99 severe diseases

Mutual cover Cover range

Up to 300,000 RMB
Inclusive solution for health insurance

56% from third tier cities or lower

32% from county and rural
Yesterday exceed 100 million users

18
Digital inclusion: regional disparities of digital financial services are
quickly shrinking

Digital trust & identification lead to SME financing “310”

China digital inclusive finance index, 2011-17
 Green Digital Finance Solution
Largest personal carbon accounts built within half a year

Banks and Big Corporations are not

the only participants in green finance
UNDP: export China examples globally
500M+ users; 100M+ trees; 20,000 cans of honey sold in minutes

Inner Mongolia Sichuan

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 First trend: technology promotes finance merging with real economy
+ “universal finance”

Commercial
Finance

Finance

Social Commercial Shopping

Social Shopping
 Bank is not the future of Fintech,
and Fintech is not a zero-sum game

Ant financial works with

 More than 400 financial institutions

 200 banks
 100 fund companies
 80 insurance companies
 Second trend: technology makes finance more inclusive and user-
centric （from B2C to C2B)

Barriers of time and distance Anytime, Anywhere

Smart
PC phones
Users

Users
Wearable
…… devices
Account
network ATM POS …… Biometric technique
Manager for personal
identification
 Future of finance: Customer-driven FinLife
powered by technology
individuals SMEs

clients
“Mine” “CFO”

Payment Wealth
management

services Loans Insurance

ecosystem Open platform

credit
capacity
risk management

fundamentals
Technology and data
 The disappointment of P2P is a shocking global story

Lending Club(LC) Funding Circle(FCH.L) P2P status in China:

More than 6700 platforms

>85% dysfunctional
The rest on the same way
Or transforming
Ability to make use of digitized information from the real
economy determines the ability to do credit lending

No need to set high interest rate for those credit lending products with
good risk control

Nearly 40% of Ant Financial’s credit lending users Default rate of credit lending
comes from 3rd tier cities and lower regions

Industry average
30~50%

Global listed companies

4~15%
Jiebei of Ant Financial
<1%
• Data from filings of listed companies or media reports
• For US listed companies, lending with more than 180 days
overdue considered as defaulted
• For A share listed companies, lending with more than 90
days overdue considered as defaulted
The nature of finance has not changed; nor its governance principle.

2015
China
Bankruptcy of P2P Fake deal or Self-financing of P2P

1930s “Whitney Scandal” Citi Bank

America Fund misappropriated “The Peruvian government bonds”

Financial Agency Financial Intermediary or Fund Raiser

Problem
Moral Hazard & Business Risk Fraud Risk (information asymmetry)

Market Information Investor

Solution
Entry Disclosure Suitability
Digital technology brings benefits, challenges, and new solutions.

Steps of privacy protection

“know you but do not know who you are”

New technologies can solve many challenges in privacy

“know you but do not know who you are”

Behavioral

Desensitized Encryption
Credit
Relation
history

Identity Ability to
authorization features honor Detect
abnormal
 Thank you!

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