Enhancing Financial Inclusion for SMEs: DBS & JD.com’s First-In-Market Partnership That Enables Business Growth
How this partnership empowered e-commerce merchants by leveraging alternative data sources and API capabilities
By Sandy Tan
In 2019, DBS Group launched its ecosystem strategy as a means of embedding our products and services into our partners’ platforms. The logic behind the move: not only could we create a more seamless and invisible journey for our customers, we could also leverage alternative data sources that would reduce the reliance on traditional financial data.
In this DBS Tech Blog post, I would like to tell you about how our team innovated a first-in-market partnership with a leading logistics platform to leverage alternative data sources and our API capabilities to enhance financial inclusion for SMEs.
Innovation Starts with the Customer
When I took on the Ecosystems role within the Institutional Banking Group (IBG) in Hong Kong, the pandemic had just taken hold of the region. This caused major shifts in consumer behaviours – particularly in the Chinese cross-border e-commerce market, where an increasing number of Chinese netizens were using platforms such as JD.com to purchase imported goods.
This became a pain point for our SME e-commerce merchant clients, as a majority of them had payment terms with overseas suppliers that were on a cash-on-delivery or advanced payment basis. This meant there could be a financial gap of up to five months between A) buying goods from the overseas supplier and B) collecting payment from the e-commerce platform. This lengthy cash conversion cycle was a bottleneck for e-commerce businesses looking to grow and expand. Merchants needed to plug this financial gap with financing, however, this was often challenging for newer businesses with weaker balance sheets.
The realisation of the above led us to create a problem statement: How might we support the growth of e-commerce merchants, while reducing the reliance on traditional financial statements?
The DBS HK Ecosystems team reached out to JD.com to discuss the possibility of co-creating a solution that addressed our customers’ pain point. We were introduced to JD.com’s logistics arm, known as JD Logistics (JDL), which operates bonded warehouses from where imported goods are sold on JD.com. By leveraging real-time supply chain transaction data collected via IoT (Internet of Things) capabilities in JDL’s warehouse, a merchant’s inventory and sales proceeds would be transmitted to DBS via APIs (application programming interface). This data would then be used as part of an alternate transaction lending scoring, thereby reducing the need for financial statements when DBS customers apply for financing loans from the bank.
What’s more, by leveraging DBS’ API capabilities, we’re able to integrate the financing into JDL’s platform. This enables the real-time exchange of data and an end-to-end digital experience. In other words, once JD’s merchants have a DBS Hong Kong bank account, they can directly apply for financing via JDL’s platform. Merchants can view their available balances and outstanding loans, as well as initiate drawdown with just one click.
Reimagining the Customer Journey
By leveraging our digital banking capabilities, DBS was able to create an end-to-end digital journey for SMEs from account opening to loan drawdown.
The underlying technology that makes these seamless digital journeys possible is API connectivity with DBS RAPID (Real-Time API by DBS). This broadly includes:
1) Onboarding APIs (e.g. sending and receiving merchant information)
2) Financing APIs (e.g. sending financing requests, and status update requests from JDL to DBS)
3) Monitoring APIs (e.g. receiving updates from JDL)
For our SME clients who are customers of JDL, the entire journey takes place on JDL’s platform. This one-stop shop experience enables SMEs to focus their efforts on growing their business, while DBS takes care of their financing needs.
What’s Next for DBS Ecosystems?
Since the success of our partnership with JD in November of 2020, we have gone on to launch new ecosystem solutions with Cainiao – the logistics arm of e-commerce platform of Tmall – and GS1 Hong Kong – the industry trade body in Hong Kong for the F&B and FMCG sectors. While we have made great strides in our ecosystems use cases, further harnessing the potential of alternative platform data remains a major target not only for ourselves, but also for other banks and fintechs looking to gain a competitive edge in the market.
Further attesting to our capabilities are the numerous accolades we’ve received both locally and globally that recognise our innovation and forward thinking. Awards include The Asset APAC’s Best Supply Chain Solution and Editors Triple Star Pick, and most recently, Global Finance’s Top Financial Innovations 2023.
DBS is constantly driving first-in-market and game-changing innovations that enhance our customers’ productivity, efficiency, and growth. And with 2022’s launch of the Hong Kong Monetary Authority’s Commercial Data Interchange – a next-gen infrastructure that facilitates data exchange between financial institutions and data providers – DBS will be able to unleash our full potential by leveraging alternative data to enhance SMEs’ access to financial services.
Sandy Tan is the Head of Ecosystems for Institutional Banking Group, DBS Bank Hong Kong. She oversees the strategy and execution of the bank’s business partnerships to deliver ecosystems solutions that provide value-added services to our clients. Sandy has a wealth of experience in the banking industry, having been part of DBS Group for over 20 years. In 2019, Sandy took on her current role in Hong Kong and has gone on to launch numerous innovative partnerships for the bank – collaborating with leading Asian players in e-commerce, supply chain management and fintech.
