Page 24 - Banking Finance February 2024

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It used '310' model , which included more than 100,000 risk best return on equity and the least Non-Performing Assets
profiling metrics and 100 credit risk models specifically suited (NPA).
to SME and individual lending.
AiBank or Baixin Bank established in 2017 initially started
It took just 3 minutes for a customer to apply for a loan and with online lending to consumers and small business, but
was approved within 1minute and without any collateral. later on they introduced many other products including
Despite of zero collateral and interest rate between 6 to digital bank accounts, payments, credit and wealth
14%, MYBank was profitable with NIM of 3 to 5% (higher management. The bank has played an important role in
than the biggest commercial bank of china), because of financial inclusion by focusing on rural areas and farmers on
lower operational and delivery costs. Moreover, NPA level digital only mode. As on 2022, the Bank has a client base of
is also lower than the traditional Banks. 50 mn and credit size surpassing 300 bn yuan.

By the end of 2021, MYbank had served more than 45 million Starling Bank is a UK-based digital bank founded in 2014 and
MSEs representing a nearly 30 percent increase year-on- was granted Digital Bank licence by the Bank of England in
year. 2016. Starling Bank had launched the UK's first digital
business bank account in March 2018. Similar Digital Banks
WeBank- China's first digital bank, WeBank, was set-up in in UK are Monzo, Firstdirect, Metro Bank etc.
December 2014 after receiving its banking license and is
now one of the largest digital banks in the world in terms of These Digital banks across the globe are using advance
user base. WeBank is a truly digital bank with no branches technology like Artificial Intelligence (eKYC, Chatbox, smart
or outlets. There is only a mobile app which is used for collection), Blockchain, Cloud Computing, Big Data etc to
banking. provide a seamless Digital Bank experience with robust
cybersecurity. They provide fully Online Financial Products
The most interesting part is that the bank doesn't require and services such as consumer loan, SME Loan, Auto Loan
collateral or guarantee but relies on the big data credit etc.
ratings and face recognition technology to give loan to
individuals and SME borrowers. From the above success story of few Banks especially
in China, have come to know what a Digital Bank is all
WeBank's cost of operation per account is only $0.5. This is about.
10-20 times cost effective when compared to cost of
operation in a traditional bank. It may be a new concept in India, but in many other
countries, Digital Banks has become a decade old concept
With all these technical advantages, WeBank is the biggest and many of them are competing with full-fledged scheduled
lender in Digital banking space in China with most profitable, commercial Bank with brick and mortar concept.

Digital Banks- Indian context
Though Indian Scheduled Commercial Banks and FIs are
leveraging heavily on Digital Banking but Digital Bank is still
a new concept in India.

On July 2022, NITI Aayog released a report "A Proposal for
Licensing & Regulatory Regime for India" for Digital Banks.
It talked about the blueprint for licensing digital banks in
India.

As per the report, "Digital Banks" or DBs means a Banks as
defined in the Banking Regulation Act, 1949 (B R Act) but
with Digital only presence. These banks will do all the

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