Tencent-backed WeBank, China’s first online-only bank, is pushing the country's regulator to accept biotechnology as a primary measure of identification on its online platforms as traditional methods become less secure.
“We are a big fan of biotech. Having biotech in financial services will really effect financial inclusion and improve efficiency,” David Ku, chairman and chief executive officer of WeBank, said Friday during a panel discussion about digital finance, held by the Institute of International Finance (IIF) in conjunction with the G20 meeting in Shanghai.
“If you assume everything will be online in the future, the current way of having user name and password isn’t going to work in terms of having the right security measures. The most effective way will eventually be biotech,” he added.
According to Ku, facial recognition, for instance, is proven to be “very effective” based on WeBank’s six-month long experience. But the lender has only been using it as a supplementary measure because the Chinese regulator hasn’t given it a green light as a qualified know-your-customer (KYC) measure.
But Ku revealed that WeBank has been discussing approval with the regulator and pushing for its implementation.
“Going forward things like facial recognition will eventually be allowed by regulators … Then there will be new business models developed on these new technologies,” he said. “The challenge now is there is no national standard on that kind of tech with very limited usage.”
WeBank, a joint venture created by Chinese internet firm Tencent, started operation in January 2015 as China's first private online-only bank - part of Beijing’s pilot programme to encourage more financial services for individual consumers and small and medium-sized companies.
“Internet finance could really be the new vehicle driving inclusive finance. There is a huge opportunity,” said Huang Yiping, deputy dean of the National Development School at Peking University and a member of the monetary policy committee at the People’s Bank of China.
Chinese SMEs have for years struggled to obtain financing from big state-owned lenders, in spite of the fact that such small-scale businesses are a key driver of economic growth and create the majority of new jobs in China.
Following the launch of WeBank, MyBank, the online lender affiliated with Chinese conglomerates Alibaba and Fosun International went online in June last year. Five months later, internet search giant Baidu partnered with Citic Bank in launching another all-digital lender.
Such moves reflect the internet firms' push into the rapidly growing space for fintech-related business and therefore have shaken up the dominance of traditional banks over all aspects in the financial industry.
Neal Cross, chief innovation officer at DBS, said revolutionary changes come slowly at traditional lenders, in particular those with a “large legacy”, such as DBS, the largest bank in Singapore and Southeast Asia. “The hardest thing is not the technology, but the legacy mindset we have inside the bank.”
