Making financial services available to the masses through AI

In this series of interviews with leaders of banks in Asia that leverage AI, we explore how the use of AI improves services and makes banking accessible to all their customers. As China’s first digital bank, WeBank is one of the most widespread and technologically savvy banks in the country. McKinsey’s Violet Chung spoke to WeBank CFO Arthur Wang to learn how the company approaches experimentation, learns through failure, and navigates the nuances of China’s market. The following transcript has been edited for clarity.

Violet Chung: My name is Violet Chung. I’m a partner at McKinsey and I’m leading a digital-analytics transformation for financial services across the Asia–Pacific region. Today’s discussion is about AI banks and the leading shapers and movers in the region. We’re very lucky to speak to Arthur Wang of WeBank today. Arthur, tell us a bit about WeBank and what you do there.

Arthur Wang: WeBank is the first digital bank in China—we have been providing our services online since the inception of our company. I’m the CFO and the board secretary of the bank. Internally, I take care of financial management. Externally, I deal with financing and take care of investor relationships as well as PR matters for the bank.

Violet Chung: How would you describe WeBank and what it does as an AI bank?

Arthur Wang: Even though our bank has been around for almost eight years, we consider ourselves a start-up. We’re always exploring better fintech technology. WeBank’s strategy is to provide better, more inclusive financial services—to the mass population as well as small and medium-size enterprises [SMEs]—with leading technology. We do business 100 percent online, so we rely on technology. In fact, more than half of our employees are engineers and programmers; we look more like a technology company than a traditional bank. Our customer strategy requires us to build the capabilities needed to serve huge volumes of customers at a low cost.

To achieve efficiency, we invest heavily in technology such as AI, blockchain, cloud computing, and data analytics. These provide strong support for our business innovation and productivity. I’ll give you some examples. We serve more than 340 million individual customers and almost 2.8 million SMEs on our digital platform with high efficiency. Our per-account IT operational and maintenance annual cost is as low as 2.2 RMB, which is equal to about 40 US cents. That’s almost a tenth of the cost of regular big banks and less than the cost of smaller banks, which gives us an advantage for serving the mass population.

We also leverage cloud computing and data analytics technology so we can build better and faster risk models than our peers. To support a fully online, convenient credit product, our online lending products are instantly available to our customers. They can get their credit assessed and approved within seconds. Before we launched our digital products, it was unimaginable for people to have their credit approved in seconds. Nowadays, it’s a regular practice. In China, historically, a lot of individuals and SMEs could not obtain credit from regular banks because those banks could not process their requests efficiently while balancing costs and returns. But we managed to do so and make a profit, so it’s commercially sustainable.

Violet Chung: You talked about technology as a source of differentiation. How else is WeBank’s AI approach different?

Arthur Wang: We use a bottom-up approach, meaning we put our business people and technology people together in joint product teams. By working together, our team members can identify opportunities for new innovations and smoothly merge technology with the process. WeBank’s success is built on hundreds or even thousands of small innovations. They eventually led to products and services, bringing business value to our bank.

We also have a tolerance for failure. We have a strategy of investing and allocating certain funds to support internal incubation. Sometimes innovative ideas or new technologies need time to develop. They fail from time to time, but we have patience. We use the fund to support them until, one day, they come out of the incubator and start to generate value.

Violet Chung: What are some examples of technology that WeBank is investing in?

Arthur Wang: We invest more than 10 percent of our annual revenue in top-notch IT each year. There are also a number of technologies that we focus on quite a bit. First, we use an AI-driven process to make sure we spend our commercial costs wisely. Second, we use a federated-learning technology to do machine learning and protect our customer privacy at the same time. Third, we have highly reliable facial-recognition technology that helps us with remote KYC [know your customer] for our online banking. With RPA technology, one person can do the same amount of work it would regularly take a few dozen employees to do.

We see other areas where we can gain efficiency and productivity. Technology can help us provide better services and products to our customers. We can build products that our competitors cannot. Our core banking system can process a huge volume of online transactions with the same efficiency and high quality as the regular large banks in China.

Violet Chung: Can you give some examples of where innovation has given WeBank the most success?

Arthur Wang: Federated learning is a key example. Our federated-learning team has been with the bank for quite a long time, and they have been making efforts to fit their models into the business practice. With federated-learning technology, we can harness data while protecting customer privacy. That gives us an advantage over our peers.

Another example of successful innovation is the core banking system. We were among the first to use distributed technology to build a banking system. It is basically a private cloud and gives us an advantage when doing business online. With distributed technology, our core banking system can process huge volumes of transactions within a short period of time and can also tolerate a lot of errors. For example, if you have a centralized system, once the central system fails, it shuts down and you cannot do anything. With distributed technology, you have many servers working at the same time. We have more than 20,000 servers within our system that replace each other if they fail so the system can be more stable.

To put this into perspective, the current transaction volume of our banking system can be as high as 800 million financial transactions per day. This is equivalent to the capability of the five big banks in China, but WeBank spent one-tenth of their IT costs to achieve the same level of capability. That’s really amazing. We can compete with a better system at a lower cost. Also, because we have this core banking system, we have technology in our own hands: we develop software ourselves. We do not rely on an external software vendor. We also have internal developer technology that uses domestically produced hardware, which also gives us an advantage when dealing with uncertainties.

Our RPA technology is another example of successful innovation. We can handle 98 percent of our customer service requests online automatically. One regular customer service staff member plus an RPA can give us 30 or 40 times the efficiency of regular banks, which has significantly reduced our costs when dealing with customer requests. This is critical for an inclusive financial-services provider. We can be extremely efficient in providing services and responding to any of our customers.

One last example of our innovation is through the satellite technologies we use to analyze the economic status of cities. That helps us understand the credit risk of certain regions or companies so we can have a better understanding of economic situations in real time. After the COVID-19 pandemic hit China, economies in some areas stopped for days or even months. We had to assess risk on a timely basis so that we could precisely manage the bank’s exposure within that portfolio. Using satellite technology and graphical analysis, we can do a better job assessing risk.

WeBank is built on failures rather than on successes. You need to have a strategy to manage the failures, to be able to fail fast and fail smartly, and to have the patience to allow people to try and test.

Arthur Wang

Violet Chung: You’re describing the ideal of what a leading AI bank should look like. What is your advice for other banks and innovators on this path?

Arthur Wang: “Success is not achieved in one day” is an important idea to keep in mind. Success requires a lot of testing, so my advice is to be prepared for failure. Financial institutions find leading technologies such as AI very attractive because they provide better efficiency, more productivity, and better services. But behind the scenes, it’s not easy to implement those technologies. You have to have the right kinds of data as a financial institution, as well as the compliance, privacy rules, and regulations to go with it. You have to get the model right and have the right team in place. In many cases, there is a gap between the expectation of what technology can do and its actual capability. Managing expectations is important in helping the company move forward at the right time.

WeBank is built on failures rather than on successes. You need to have a strategy to manage the failures, to be able to fail fast and fail smartly, and to have the patience to allow people to try and test. Among the few successes at WeBank, we have had thousands of failures, but we needed to have patience and faith in innovation. Once you are successful, even with one single innovation, the power it unleashes is amazing. To reach that level, you need to have patience and a tolerance for failures. That’s the key advice I want to give others.

Violet Chung: That’s great advice, Arthur. We’re going to switch gears a little bit to ask you about your leadership style. You’ve been with WeBank for a while now. How has your perception of and experience in WeBank changed since you’ve been there? And what defines the success of leadership, in your opinion?

Arthur Wang: My perception of the bank has not changed, but I think it is important to stick to strategy: our technology strategy, our customer strategy, and our ambition. There have been a lot of changes these days, both inside and outside China. For our company to run, we have to be persistent and have faith in our strategy—especially in our technology. I believe with continuous innovation and faith in technology, we can achieve our business purpose and generate value for society. Sometimes we need to adapt to changes in the environment, but we need to stick to our strategy throughout.

Violet Chung: What is it like to lead a company in China and Asia, where companies are leading innovation globally? How are the interests and skill set as a leader different compared with leaders elsewhere?

Arthur Wang: To do business in China, in Asia, there are a few things we need to bear in mind. First, Asia is developing fast, especially China. There are ample opportunities here for financial services—not just banking but also wealth management and insurance—because of the escalation of individual wealth. These services are in high demand. The second thing we need to consider is compliance, which is always updating because China has been developing fast.

A responsible innovator must work proactively with regulators, build common understanding, and help them catch up with innovation in technology. That way, we can proactively manage our compliance issues.

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