Page 23 - BANKING FINANCE February 2024

ARTICLE

'DIGITAL BANK'-

LICENSING AND

REGULATORY

FRAMEWORK IN

INDIA AND WAY

FORWARD

L ast 6 to 8 years have seen rapid development in Success story of Digital Bank- China
'Digital bank' across the world, and China is no
MYBank or Zhejiang Network Merchants Bank Co, founded
exception. Digital banks have an entirely branchless
in 2015 is targeting mainly smaller firms, with about 80
digital service and the need for physical branches
percent having less than 10 employees.
is replaced by non-stop, 24/7 customer service and
automated systems.
Most of its MSE borrowers do not have established Banking
relationships with traditional banks. Infact more than 70
These Banks have been formed by large conglomerates like
percent are having difficulties in getting loans previously
WeChat, Baidu, Xiomi, Ant group etc. that have huge
from any financial institutions. Its loans are generally of
customer base and all the ecosystems for a seamless smaller ticket size, for shorter duration, and are used
expansion of fully Digital Bank. Few of the Digital Banks in primarily for working capital purposes.
China are - Ai Bank, MyBank, WeBank, XW Bank etc.
It established an online-only platform that enabled SMEs to
During the past few years, these Banks have made
open accounts and apply for loans quickly and easily, without
remarkable success in the field of business lending, agri
the need for extensive paperwork or physical branches. Big
lending, consumer lending, financial inclusions etc.
data and AI were used to assess the creditworthiness of
applicants, allowing for quicker and more accurate lending
decisions. They used data of consumer repayment records
from e-commerce platforms like Alibaba and Alipay,
smartphone payment records, registered online customer
profiles, e-commerce transactions, local government
records, and insurance records to assess loan applications.

20 | 2024 | FEBRUARY | BANKING FINANCE