From Shenzhen: Mission Impossible? How WeBank reached 200m customers in 5 years.
By Jianqian Lin
Does it sound like a mission impossible for a bank to reach 200m retail customers, 1.7m corporate customers, and 40% CAGR in operating revenue in 5 years? The secret sauce? Digital — in every aspect from customer acquisition to underwriting. Read on to find out what’s behind it…
Who?
Founded in 2014 and backed by Tencent, WeBank offers unbanked and underbanked individuals and SMEs financial services including lending, deposit, and investments. As China’s first privately funded bank and digital-only bank, it has served 270m individual customers,19m of which have no credit record.
Problem
Micro SMEs like mom-and-pop shops and individuals without a credit history are historically overlooked by traditional banks because the cost-profit model does not work well. In addition, it’s been traditionally hard to pull data to prove the creditworthiness of an applicant without much credit history.
Low Customer Acquisition
Does “Tencent” and “We”+sth ring a bell? It’s not a coincidence with WeChat — they are actually related. The user base and engagement from Wechat fuel Webank’s fast and broad reach and lead to an extremely low customer acquisition cost, which is one of the main cost drives for traditional banks.
Profitability
As you can imagine, underserved groups don’t bring as much revenue — the average revenue per user is only around $10 USD, which is ~1/10 or even more fractional compared to the incumbent banks. However, with the massive scale + low CAC enabled by data, the company is able to reach profitability since 2015.
Technology
As a digital bank, Webank leverages the advantage of the “ABCD” technology (AI, Blockchain, the Cloud and Data) to optimize efficiency and adopt a scalable model. Using AI, the company handles ~ 1m customer inquiries per day. The tech-focused approach allows the company to reach the scale without having a single branch.
Pre-Underwriting
Instead of having customers reaching out, Webank leverages the rich data on other platforms e.g.Wechat to pre-underwrite and send invites to potential users. Once the user accepts the invitation, the AI computation model grabs external data which feeds to a real-time credit limit to the customer. The whole process takes 5 seconds.
Partnerships
Webank also partners with @PDD and @JD to broaden the microloan use cases in shopping. It’s not a surprise since @PDD’s target customers are mainly from lower-tier cities, a group that overlaps with the underserved and unbanked individuals. In the West, we are seeing a similar trend shown by @Amazon’s BNPL program.
Special Services
WeBank is also committed to enabling special groups to use undifferentiated financial services. WeBank’s “Micro Loan” product was the first in the industry to set up a sign language service team to assist customers with hearing and language impairments through remote video.
Open Bank
Webank is a strong believer in open banking. The proposition of 3 Open’s (Open platform, collaboration and platform) is set up to help non-financial services companies (e.g. retailers, software companies) provide financial services using tools like API and SDK, to drive shared business infrastructure and to empower partnerships.
Takeaways
First, just like @Angela Strange @a16z says in Every company is a Fintech company: “Every company, as we saw with @Uber, @Lyft, @Shopify, @Mindbody, should be thinking about how to leverage financial services to better serve their customers, better retain their customers, and drive more margin.”
Secondly, marketing in a proactive way: Use big data to predict what the customers need and invite them to your solutions. 2. Small money adds up: small ticket size x massive scale — little CAC = profit. 3. Every company is a Fintech company, take your user base and everything you know about your customers and take it further.
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