A fintech leveraging artificial intelligence and mobile verification technologies to address the widespread lack of access to credit via traditional financial institutions in China and Hong Kong has secured $220 million in combined equity and debt financing to fund expansion into Southeast Asia.
While 79 percent of China’s adult population hold accounts with traditional financial institutions, only 10 percent have managed to borrow money from these same institutions, according to 2014 World Bank estimates.
Part of the challenge of offering lines of credit to this population stems from the general newness of consumer credit scoring. China’s banking regulators only created a consumer credit database in 2006, whereas FICO launched its credit scoring system stateside in 1989. Without the insight and sense of security a credit score can provide lenders, Chinese banks have oftentimes opted to avoid the risk of lending at all.
But the lending products of WeLab, a Hong Kong-based fintech, don’t rely on traditional credit ratings. The fintech automates the process by running credit checks directly in-app using alternative user information, say, social media activity or consistency of bill payment. The startup claims to be able to provide a loan decision within seconds.
Founded in 2013, WeLab claims to serve 25 million users across China and Hong Kong with $28 billion in loans processed to date.
While the startup’s technology is proprietary, their website indicates that they also license their product to banks and telecommunications companies to enable them to provide similar services to their customers. Thus far, WeLab has partnered with 40 banks.
Before founding WeLab, Simon Loong worked at financial institutions like Citibank and Standard Chartered. Banks at these legacy institutions have traditionally had to have at least one face-to-face interaction, Loong explained to Tech in Asia. Their Hong Kong and mainland products directly addresses that pain point. By monitoring users’ online behavior and employing facial recognition, the fintech is able to not only make credit decisions within seconds, but can process more than a million applications per month. And, by automating the process of user identity verification and credit checks, banks save on the costs of hiring staff and maintaining physical branches to vet potential borrowers. For example, Loong said the artificial intelligence behind WeChat’s chatbot ‘WeBot’ now handles 70 percent of WeLab’s customer service enquiries.
With loan amounts ranging from US$450 to US$7,500, Wolaidai’s loan delinquency rate—where borrowers make late payments—hovers at two to three percent.
“There was a bank that came to me and said that they couldn’t do lending less than [US$30,000] per ticket size, because they couldn’t break even. It’s just too human intensive,” Loong told Tech in Asia. “So they can’t do small ticket-sized lending for the mass market.”
Investors in the recent round, which brought WeLab’s total funding to $425 million, include the Alibaba Hong Kong Entrepreneurs Fund, the World Bank’s International Finance Corporation (IFC) and Credit Suisse. The influx of cash will be applied to both continued development of the fintech’s artificial intelligence and automation technology as well as expansion into Southeast Asia, where a majority of the population not only lacks credit history, but is unbanked to begin with.
“We see Southeast Asia as a region with huge growth potential for WeLab due to its high percentage of unbanked population (73 percent out of 600 million) which makes it impossible to borrow and its high mobile penetration rate (133 percent),” Loong told TechCrunch.
Cadence is a fintech reporter and writer at Fintech Unltd, where she covers the changing landscape of financial technologies. Previously, Cadence interned at Psychology Today, Business Insider and the Wisconsin State Journal. Cadence is interested in how science and technology intersect with power and culture and is curious about the world we are creating for tomorrow, consciously or not. She graduated from the University of Wisconsin–Madison in 2017 with degrees in Journalism and Chinese. Send tips and story ideas to Cadence at [email protected] You can also follow her on Twitter @cadencebambenek.