In recent weeks, prominent consumer finance companies in China, including Zhaolian Finance and Industrial Bank Consumer Finance, have released their performance reports for the first half of the yearThese reports reveal that the sector is advancing rapidly in its digital transformation effortsThrough innovative digital services, these companies are fortifying their risk management capabilities, striving for a balanced development in terms of scale, efficiency, and quality.

Experts have pointed out that the consumer finance industry is facing certain challenges due to various factors, including the current economic climate, market environment, and adjustments in the financial industry's asset structureHowever, many consumer finance companies are dynamically adjusting their operational strategies, significantly increasing their investments in cutting-edge technologies like large models, cloud computing, and artificial intelligence to reduce costs and enhance efficiency across the industry.

One of the key drivers of improvement in consumer finance has been technological innovation

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This year, the industry has accelerated the development of what is termed 'new quality productivity', focusing on leveraging advanced technologies to optimize their servicesThese innovations are aimed at reducing costs while also elevating the extent of customer satisfaction and addressing diverse consumer needs.

Under the influence of financial technology, several consumer finance institutions have shown stable growthZhaolian Finance reported its total assets reaching a remarkable 157.8 billion yuan by the end of June 2024, with net assets up by 8.5% to 22.09 billion yuanThis highlights its solid growth trajectorySimilarly, Industrial Bank Consumer Finance has been promoting collaborative growth through synergies between regional services and product offerings, integrating online and offline services, and enhancing digital product innovation capabilitiesBy the mid-year mark, it had reached a total loan balance of 72.48 billion yuan, successfully providing over 360 billion yuan in consumer credit since its inception and serving over 22 million customers.

Large models have emerged as a significant spotlight in technological innovation

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As artificial intelligence continues to evolve, the consumer finance sector is witnessing a competitive landscape often referred to as the “hundred models battle.” Institutions are keenly aware of impending trends and are well-positioned to seize opportunities as they ariseFor instance, Ma Shang Consumer Finance has launched its retail finance "Sky Mirror Model," while Zhaolian Finance has introduced its "Zhaolian Intelligent Deer" and "Intelligent Deer 2nd Generation" financial models, which provide substantial technological support for financial innovation.

Sun Lei, the Deputy General Manager of Ma Shang Consumer Finance, noted that the integration of large data analysis and AI technologies allows consumer finance firms to delve deeper into clients' spending habits and latent needsThis intelligence helps in delivering personalized financial products and services tailored to individual requirements

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Retail finance, aiming directly at consumers, naturally has a larger user base, frequent transactions, and a substantial data volume, allowing it to fully leverage its digital advantagesThe ongoing technological innovations are facilitating the digital transformation of retail finance, rendering financial services more accessible and efficient.

The concept of inclusive digital finance is playing a crucial role in extending consumer finance services to a broader range of “long-tail” customersAs the reach of inclusive finance expands, its critical role in filling the gaps left by traditional banking services and enhancing consumer capabilities has become increasingly evidentConsumer finance institutions are creating a landscape of differentiated competition and complementary development with traditional banks, speeding up the establishment of a multi-layered financial services system.

According to Mo Xiugen, Deputy Director of the China Inclusive Finance Research Institute at Renmin University, the digitization process has slashed the operational costs and entry barriers for inclusive finance, thereby increasing service efficiency and accessibility to high-quality financial services for more demographics

This means that whether they are urban dwellers or residents in remote rural areas, as long as there is a credit need, they stand a chance to access digital inclusive servicesNowadays, consumer finance institutions leverage big data analysis to assess borrowers' credit profiles more accurately while simplifying loan processes and reducing operational costs, further augmenting the allure of inclusive loans.

The customization of inclusive services reflects how consumer finance institutions are dedicated to pursuing digital inclusivityA representative from Zhaolian Finance explained that with the help of AI voice assistants, users can complete self-authentication and approvals independently, breaking down past limitations of time and space in financial servicesTo further ease the “self-certification” process for users, Zhaolian has launched an industry knowledge graph, offering tailored online services based on users' distinct demands regarding financial products and funding timelines

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To date, the self-service authentication system introduced has reduced costs for over 15 million customers and has allowed more than 120,000 individuals to enjoy unconditional interest waivers.

Digital inclusion is instrumental in enhancing the accessibility and specificity of financial services for new urban residents, individual entrepreneurs, and similar groups, addressing their urgent challenges in entrepreneurship and consumptionAs China's urbanization accelerates, the pressing question emerges: how can new urban residents be attracted to settle and thrive in these areas? In this context, digital powers are playing a crucial role in driving the advancement of consumer finance.

Fan Yali, a prime example of a beneficiary of digital inclusion, made her way from a small county to Zhengzhou, where she founded Zhengzhou Rooted Logistics Co., primarily focusing on express delivery services

Last year, she made substantial investments to scale up her operationsWhile business concerns were alleviated, household expenses became increasingly burdensomeFan recounted an experience where a manager from Central Plains Consumer Finance introduced the Youka customer service program at the logistics park, presenting tailored high credit limits, low interest rates, and exclusive manager assistance without the need for document submissionUtilizing digital services significantly enhanced the accessibility of consumer finance products for her.

Insights from the Tianyancha Data Research Institute indicate that new urban residents often face hurdles in accessing traditional financial services due to a lack of credit history and reliable collateral, which complicates financial institutions' understanding of their financial profilesBy embracing digital inclusion, consumer finance organizations can deploy data models to assess and respond to the consumption finance needs of new urban residents more accurately.

Currently, digital inclusion is hastening the precise alignment of consumer finance institutions with market demands

By accelerating their digital transformation efforts, these institutions can better leverage advanced technology, streamline their service processes, improve operational efficiency, and provide consumers with more personalized financial servicesRural areas and communities have emerged as vital targets for consumer finance developmentThrough digital channels, financial institutions can accurately gauge the needs of these markets, offering customized services that not only expand market share but also encourage sustainable growth.

Another aspect of the consumer finance sector is its growing emphasis on risk managementThe industry has access to vast amounts of data, which provides a firm foundation for accelerating its digital transformationThe former CBIRC has released guidelines stressing the importance of strategic risk management in the digital transformation process to ensure that institutional strategies and implementations align with their operational and technological realities as well as their risk management capabilities.

Sun Lei highlights that the urgent need for digital transformation is exacerbated by the financial sector's high data density and compliance requirements

There is a heightened demand for data security, accuracy, and timeliness within the financial services industryThis means any digital transformation initiative must come with robust security measures to ensure the sustainable operation of consumer finance businesses.

This year, consumer finance institutions have intensified their focus on building digital governance structures and control systems to fortify the risk mitigation framework of their digital transformation endeavors while also ensuring complianceA representative from Haier Consumer Finance shared that through the integration of AI, big data governance, and security oversight, they have achieved refined management and real-time monitoring across various operational stages, from pre-loan assessments to post-loan oversight, thus enhancing operational efficiency while mitigating potential risks.

Technological advancements are proving to be instrumental in safeguarding the integrity of financial systems and upholding consumer rights

As noted by Du Yang, a researcher at the Bank of China Research Institute, big data analytics enable the surveillance of atypical behaviors during financial transactions by continuously collecting and analyzing vast amounts of dataFinancial institutions can construct user profiles based on diverse parameters, including transaction habits and geographic locations, leading to more accurate behavioral insightsMeanwhile, AI technologies, particularly machine learning algorithms, can refine and enhance risk assessment models by identifying patterns from numerous fraud cases and offering timely alerts of new fraudulent methodologies.

To meet the imperative of data protection in compliance with regulatory requirements, consumer finance companies have instituted strict data governance frameworks, deploying advanced encryption methods and access controls to effectively prevent data breaches and unauthorized access, thereby solidifying a protective barrier for user information.

While the digital risk management framework is being rounded out, the consumer finance sector must also expedite the maximization of data value, collectively fueling the industry's resilient growth