The Future of Banking Has Arrived

At a time when the majority of the banking industry is trying to adjust business models to reflect a more digital ecosystem, several financial and non-financial organizations in China have already brought together big data, advanced analytics, modern digital technology and an innovation culture to deliver exceptional consumer experiences. The question is, can financial institutions elsewhere in the world catch up?

As part of a recent week-long trip to Shenzhen, China, I visited some of the most technologically advanced organizations in the world. Starting with a rare two-day private tour of Huawei Technologies, I was then provided exclusive access to executives from Ping An Financial Services, WeLab, Alibaba and WeBank (founded by Tencent). These meetings provided an unfiltered perspective into the future of technology and how financial services can be delivered.

Beyond allowing me to experience how a city of the future operates, each stop greatly expanded my horizon of what has been achieved by businesses in this region. It also enlightened me on the potential of what can be achieved if financial and non-financial organizations followed the lead of China in the areas of data analytics and privacy, building an innovation culture, committing to ongoing research and development, focusing on financial inclusion, and taking advantage of the potential of collaboration.

Upon arrival in Shenzhen, it was immediately apparent I had arrived in a “city of the future.” From the eerily quiet impact of near 100% electric vehicle penetration, to the masses of bicycles — and cameras — on every corner, the contrast to a typical city in the West was striking. Unlike the feel of a “normal” city, virtually nobody is on the streets except before work, during lunch, or after work during a normal work day. That work day still lasts 12 hours, six days a week at most companies. Shenzhen sometimes feel like a vacated metropolis.

Above street level, the architecture exemplifies the rapid development of this 40-year old city, with multiple city centers, ultramodern designs and ever-increasing heights. Once a small agricultural border town, Shenzhen is now home to more than 20 million, with an area that has expanded sixfold, a population that has increased by 40 times, and a GDP that has grown by nearly 9,000 times since 1978.

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Huawei: A Commitment to R&D and an Intelligent Future

In the United States, very little is known about the Chinese smartphone giant Huawei outside of the narrative created around the belief that technology bought from the firm could be used to spy on behalf of the Chinese government. The U.S. has even “asked” allies to avoid doing business with Huawei for this reason.

Without any way to personally confirm or refute the rhetoric-driven accusations, I was captivated from the minute we arrived at Huawei’s corporate headquarters in downtown Shenzhen. With a setting that resembles a university campus, including lakes, trees and numerous places to eat, our small group (that included Brett King and Jay Kemp from Provoke Management) got a rare glimpse of the advanced technology already being deployed in China and beyond.

From massively powerful new chips, to the smart city control center and examples of energy deployment using 5G and AI technology, Huawei has clearly expanded far beyond simply being a telecommunications equipment manufacturer. In fact, the firm illustrated throughout our tour of its Exposition Center how they are quickly moving beyond technological and product engineering innovations to focus more on breakthroughs and inventions related to intelligent deployment of innovative solutions for a fully connected, intelligent future.

Not ready to rest on their laurels, executives from the financial services division made it clear that Huawei was as interested in how to improve what they currently deliver as they were eager to share what they had achieved. With a vision of building synergies between what has been achieved in other verticals served by Huawei, and the continued expansion of collaboration with firms inside and outside the region, there is an obvious desire to become a financial services leader through increased R&D.

Nowhere is the commitment to R&D at scale more evident than when we received an exclusive look at the new five-year-old European-themed Ox Horn campus located in Dongguan, China. Built to replicate 12 iconic European “towns,” including Paris, Budapest, Heidelberg and Verona, the impeccably landscaped 3.5 square mile campus has been built to be an inviting work home for close to 25,000 primarily R&D employees.

The European-inspired campus provides a unique work environment for the R&D workers of Huawei.

The campus is connected by a series of small trams imported from Switzerland linking the campus to manufacturing facilities, company-subsidized housing and Huawei University (for continuing education). Similar to the feeling we had in Shenzhen, the apparent deserted atmosphere throughout the campus changes at the beginning and end of the workday. Not unlike tech campuses in the U.S. and elsewhere, workers are encouraged to remain on campus during the workday with a vast array of subsidized food options available in on-site cafeterias.

Tour train

Multiple trams imported from Switzerland transport workers across the 3.5 square mile Huawei campus.

Finally, our tour of Huawei wouldn’t be complete without a visit to one of their many smartphone manufacturing facilities which is in close proximity to the European village. Our team was able to see a production line where 2,400 mobile devices a day are produced by the combined efforts of the most modern robotic technology and only 13 workers (down from roughly 85 a short time ago).

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Ping An Financial: The Spotify of Financial Services

The third and fourth days of my visit to Shenzhen was guided by my friend, Matt Dooley, fintech pioneer in Hong Kong and founding board member of the Fintech Association of Hong Kong. Matt is also the founder of Connected Thinking Ltd., a fintech advisory firm that specializes in executive immersions into various Asian innovation hubs. We were joined by the former global CEO of HeathWallace, Dave Wallace from the UK. For two days, Dooley provided Dave and I unprecedented access to some of the biggest and best known financial services firms in China.

There was no place better to start than over lunch on the 118th floor of the Ping An Financial Tower with Ericson Chan, CEO of Ping An Technology. Ping An is China’s largest insurer and #7 on the Forbes Global 2000 list of largest public companies. This global status was achieved by moving beyond insurance to become a digital provider for virtually every financial service, including insurance, corporate finance, investments, lending and retail banking (Ping An Bank). As Dave Wallace stated, “The growth of Ping An is best illustrated by the fact that at one stage HSBC was Ping An’s largest shareholder — and today, Ping An is the largest shareholder in HSBC.”

Lunch on the 118 floor of the Ping An Tower included myself, Ericson Chan, Matt Dooley and Dave Wallace.

Even more impressive than the size of the organization is the firm’s use of data, advanced insights and technology to expand across a consumer’s lifecycle, including the development of a healthcare portal, support of auto dealer financing, collaboration on smart city development and deployment of a platform that connects both financial and non-financial services. Using a multitude of free mobile apps and advanced technology including the most advanced biometric capabilities in the world, Ping An connects with both customers and non-customers of the organization similar to the way Spotify offers music.

Not surprisingly, the expansion of services through their various business lines allows Ping An to collect data and insights with every touch of a mobile key. While data from one area of the organization may not be able to be used in other areas (due to regulatory constraints), the obsession with integrating technology and insights for an improved level of service and lifestyle is paramount. More importantly, as with every organization I visited during my time in China, a culture of innovation transcends the entire organization.

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WeLab: Using Analytics to Provide Digital Lending for the Masses

From one of the largest financial conglomerates in the world, our trio visited Simon Loong, Stanford graduate and founder/CEO of lending fintech WeLab. With a strong 15-year background in legacy banking risk assessment from Standard Chartered and Citibank, Loong set out to create a seamless digital lending platform for both consumers and small businesses.

To compete with regional powerhouses such as Ant Financial, Tencent’s WeBank and Kabbage, WeLab found a profitable niches serving relatively underserved tech-savvy consumers who are early adapters of new technologies and enterprises looking for strong risk assessment software. While the average consumer loan size is relatively small compared to traditional loans, the target audience is huge. Today, WeLab serves more than 40 million customers across Hong Kong, Mainland China, and Indonesia.

Founder and CEO Simon Loong and head of strategy, Jessica Lam shared insights into the model that has made WeLab a unique provider of credit in the Chinese market.

What really sets WeLab apart from their competition is the use of mobile data to analyze the credit profile of its future mobile device owner. “Within seconds of a customer getting a phone, we can build a credit profile and make a loan decision,” according to Loong. “It’s the difference between getting a loan in three seconds vs. three days or longer at traditional banks.”

Not to be missed as part of our visit, WeLab is also focused on promoting a strong employee culture. In a region where a workday is usually 9am – 9pm, six days a week, Simon and his team are finalizing a culture handbook that outlines what the organization stands for. “The thing I was really struck by was their attitude to staff and how important culture is to the way they do business,” stated Dave Wallace. “The average age of their staff is 27, and they want to stand out in the marketplace by encouraging a better work/life balance.”

Matt Dooley explained, “The future of retail banking is about disrupting marketing and the path to purchase … knowing consumers better than they know themselves. The ability to anticipate a consumer’s next purchase or what they’ll do in the next 10 minutes, with real-time insights and predictive analytics allows the best fintech firms to connect customers to merchants to opportunities seamlessly.”

This differentiation is especially important since WeLab has recently received only the fourth online-only banking license granted by the Hong Kong Banking Authority. With many consumers disenchanted with the experience provided by legacy banks in the region, WeLab may be a fintech to watch.

Alibaba: Using Cloud Computing to Disrupt More Than Banking

To define the business structure of Alibaba is almost as difficult as trying to pick up a droplet of mercury on a marble countertop. Much more than a retailing platform that is often compared to Amazon in the West, Alibaba can more appropriately be defined by the way they connect buyers and sellers of all types of products and services using advanced technology, consumer insights, mobile devices and cloud-based platforms.

With almost 700 million users a month, Alibaba may have no equal in the world. Our visit to Alibaba focused on the deployment of the Alibaba Cloud, considered the backbone of the delivery of Alibaba services globally. We met with Garry Sien, principal advisory consultant for Alibaba Cloud.

Providing a glimpse into the successful cloud strategy of Alibaba were Garry Sien and Vivian Huang of Alibaba Cloud.

During our meeting, it was clear that, similar to Amazon, Alibaba wants to have an impact across the entire consumer lifecycle. Beyond supporting the business divisions of Alibaba, Alibaba Cloud wants to provide their software as a service, helping firms across all industry verticals with everything from logistics and supply chain insight to marketing and reporting.

Between Alibaba Group and Ant Financial, the Alibaba digital economy is without equal, serving 70% of the Chinese population (730M consumers) and a vastly increasing number of consumers and businesses worldwide (130M consumers). Of all of the organizations we visited during our short stay in China, Alibaba was the most likely to penetrate all markets the quickest.

WeBank: Using an Innovation Culture to Build the Largest Digital Bank

Upon entering a modest conference room that overlooked the Enterprise Command Center for Tencent-backed WeBank, it was clear we were about to see the future of digital banking … in real time. Even before Executive Vice President and Chief Innovation Officer Henry Ma entered the room, Tyler Aveni shared statistics about the firm that were mind blowing.

For instance, WeBank introduces between 20-30 product updates each month on their 30 different product lines that serve 206 million customers (not including WeChat Pay). The digital-only bank processes more than 575 million transactions/day with massive redundancy of systems supporting 99.9985% up time. Despite this level of technological support, WeBank has a cost of serving customers that is a fraction of what it costs a traditional bank.

EVP and Chief Information Officer Henry Ma and Alabama native Tyler Aveni wowed our team with the innovation and customer information culture of WeBank as we overlooked their Enterprise Command Center.

This allows WeBank to not just focus on the high-balance consumer and small business, but all consumers. While Henry Ma told us there is a segment of consumers that they support at a financial loss, he believes this is the corporate responsibility of WeBank. This strategy avoids leaving “potential revenues on the table,” which may explain why WeBank is one of the most profitable digital banks in the world.

Most impressively, the five-year-old bank has 900 patents approved and pending, with new innovations moving from ideation to introduction in 11 days.

“One example of an innovation that amazed me was a loan product where customers are able to apply and be approved for a loan in the time it takes to stand in line to pay for something,” said David Wallace. “The APRs were attractive, the terms are relatively short and customers are able to pay the loan off early without any charge. Speed was the customer experience differentiator.”

Retaining employees (with an average age of 29 years old) is also a priority at WeBank, with personalized career and skills training being emphasized. The organization is also working on more flexible working hours, according to Ma.

An Imperfect Future and a Call to Action

While my visit to China was an eye opener on many fronts, it didn’t come without some questions and concerns.

First of all, underlying all of our visits was the question whether the majority of these services will ever move West. With an underlying tenet for acceptance of a financial service partner being trust, will consumers beyond mainline China open a product or service supported by these exceptional organizations?

Alternatively, will traditional or non-traditional organizations outside of China ever be capable of deploying services with the functionality, personalization and speed of innovation that we saw in China? One challenge is that the culture of China supports a worker focus and mentality which is not as prevalent in the West. In addition, while organizations we saw in China have large components of their workforce committed to research and development, most banking institutions outside China have a much more modest support.

“We hear countless discussion about Marcus and Apple’s credit card in the US and yet WeBank has grown at about 10x that of Marcus and any other challenger bank, and Alipay and WeChat Pay now annually process more mobile payments than the world’s plastic cards,” stated Brett King. “Shenzhen is one of the most innovative cities in the world, and an epicenter of China’s Fintech revolution.”

Matt Dooley added, “The Chinese have taken data analytics and design thinking principles to the next level. The successful founders and operators of China’s largest and fastest growing tech and modern financial firms understand, empathize with, and offer tailored solutions that are contextual and embedded into wider customer experiences. These services are seamless and don’t impede the Chinese consumer from getting on with their life.”

Finally, it was striking the correlation between the digital efficiency of the services and products deployed in China and the ability to provide financial inclusion across product lines. With the combination of combination of high tech back offices and digital supported delivery, no consumer is left out of the equation in financial services or any other industry vertical. The commitment to inclusion is paramount among all of the firms we visited.

The question then becomes, how will banking organizations globally respond to the amazing potential in front of us?

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