How China’s AI-powered business models are turning traditional banking on its head
Photo by Zhang Kaiyv at Unsplash.
China is leading the way in the development of artificial intelligence – and like most trends that originate there, it’s one that is set to impact how we do banking in the West.
The association between China and imitation, rather than innovation, is officially outdated. Not only is it leading the way in e-commerce and retail trends, but its finance industry is benefitting from advances in technology that are entirely unique.
We know that China has led the global movement away from cash and towards digital payments. Even pre-pandemic, it was a country where a wave of a phone trumped a handful of banknotes.
It is also leading the way in AI-powered services. One of the key industries primed to take advantage of these leaps into a technologically-enhanced future is banking and finance. Beyond merely digital payments, China has embraced a reality where FinTech is fast unseating traditional banking models.
- Read More: Why China is leading the FinTech revolution
What is AI?
To start with, it’s not just another tech trend.
“Within a decade, all technologies–from everyday business to genomic editing–will in some way touch A.I. Today, China is poised to become its undisputed global leader, and that will affect every business,” according to Inc. magazine.
Artificial Intelligence might traditionally be associated with science-fiction, but its most common form is actually machine learning (ML) – far less other-worldly and yet, proven to be an incredibly useful and profitable business tool.
ML is a teachable system that can automate both front and back-office processes and mitigate issues before they happen. Instead of operating based on unchanging protocols, it can learn from its own analyses. This evolutionary capability is key: an investment in AI and specifically ML technology actually increases in value over time.
Bank and financial service providers already use AI and ML, but developments in the technology are moving quickly. Businesses that can use machine and deep learning techniques to mine, refine, and make products from data culled from all areas of operation (from customer service to employee productivity) will gain a big edge.
The benefits don’t just lie with business, though…
Why the need for transformation?
Photo by GR Stocks at Unsplash.
It’s almost 30 years since Bill Gates said, “Banking is necessary, but banks are not”. Since 2020, this statement has never been more apt.
In the West, like in China, our current banking system is desperate for transformation. Consumer preferences are evolving. Big banks, though, aren’t equipped to evolve far enough, fast enough, to keep up.
FinTech, and its leveraging of AI technologies, is considered by many to be the solution to this gap in the market. AI can be used to minimise risk, boost financial inclusion, speed up processing times and smooth customer experiences – plus a whole lot more. The ability for FinTech to respond and meet the needs of the next generation of digital consumers far outweighs the ability of traditional banks.
China is proof of that.
How AI is powering China’s financial revolution
Photo by Jeffrey Czum at Pexels.
The benefits for both businesses and consumers that come from AI combined with large data sets are enormous. Fast, integrated, personalised and cheap financial services? Consumers win. Low-risk, cost-efficient, high-value and scalable products? Businesses win.
China is already there, helped by its large, digitally-savvy population and the treasure trove of user data that comes with it. It has the highest internet population in the world with approximately 802 million active internet users compared to around 300 million internet users in the US.
The average Chinese citizen today relies on one of the country’s major super-apps to conduct most if not all areas of ‘life admin’. From ordering a taxi, shopping online and paying bills, to applying for a loan and transferring funds, all of these functions and more can be completed through highly integrated apps.
- Read more: China’s Super-Apps: Explained
These apps sit under the umbrella of companies like Ant Group (formerly Ant Financial) and utilise AI application scenarios to power its financial product offering.
According to PWC, these scenarios fall into four aspects:
- Speech recognition and natural language processing applications, such as smart customer service and voice data mining;
- Service robotics applications, such as room inspection and intelligence robot;
- Machine learning, neural network application and knowledge map, such as customer persona, antifraud, intelligent risk control and robo-advisor;
- Computer vision and biometrics applications, such as portrait surveillance warning, employee irregularities monitoring and core area security monitoring.
Case in point: Ant Group
Ant Group. Photo by VCG.
In true FinTech form, Ant Group isn’t a financial company but rather, one that offers financial services. Its main iteration is Alipay, used by more than one billion individuals to spend, borrow or invest their money. The Group also includes Huabei, a virtual credit card platform; Jiebei, a consumer loan platform; MYBank, an online bank; as well as many other offerings.
The key to its success? Most would agree it’s how it uses data. For instance, how it pools and matches data from all its services to boost efficiency and offer ultra-targeted personalisation.
“Alipay captures the data on how consumers use the app. This data trains its AI to create a more personal experience. It also lets merchants know where users are. And hence the merchants can notify Alipay users of nearby services, with deals and coupons.
Thus, AI enhances the current service. In addition, it provides insights into what people would like to do with it. And what services Ant Financial could deliver going forward,” explains Professor Tero Ojanperä.
The result is wins like:
- Rapid growth at least in part due to its ability to use data on customers and corporates to “predict credit risk and provide customised services,” a goal accomplished via AI.
- Vision-based AI that simplifies car insurance claims. Users simply take a photo with a smartphone and upload it to Alipay. The image recognition system then analyses and processes the case. If the system detects no sign of dent, scratch or similar, it alerts a human to take over the claim.
- Health insurance claims are processed similarly. Natural language processing and health knowledge graphs combine to understand the language used in the claims. The AI system extracts entities like hospital, disease, department, surgery, and insurance products.
As previously mentioned, AI learns over time. So these wins gain ground as the systems evolve. Every transaction processed and every claim resolved means better service and better efficiencies.
AI-driven FinTech is already helping to transform – and humanise – the financial services sector. And the results benefit both consumers and businesses. The only question is how quickly the rest of the world can learn from China’s financial progress.
For more insights into China and its business opportunities, contact PyxHub.