Experts: Fintech firms can boost banks in supply chain finance

Fintech companies can back banks to develop supply chain finance with their strength in risk control, to better meet the demands of financing for small and medium-sized enterprises, experts said.

Supply chain finance provides systematic financing services that link the various participants in the transaction, such as buyers, sellers and financing institutes, in order to lower financing costs and improve efficiency.

The growth of supply chain finance in China is about 4.5 percent to 5 percent from 2017 to 2020 annually on average. By 2020, its output value is expected to reach 15 trillion yuan ($2.18 trillion) in the country, according to Gao Feng, chief information officer of the China Banking Association, at a forum Thursday.

However, over the last decade, such business is mainly between large and medium-sized banks and State-owned or listed enterprises in China. Some small and medium-sized banks, as well as city-level and rural commercial banks, don't even have such services, said Gao.

He added the reason is that it's difficult for banks to control the risk of loans in terms of serving the many downstream suppliers and franchisers, in lack of support of related financial technologies and policies involving credit investigation and invoice.

Cooperation between fintech firms and small and medium-sized banks can possibly solve the problem, experts said at the forum.

In October 2018, OneConnect, a financial technology service company under Ping An Insurance (Group) Company of China, released an intelligent supply chain finance platform to link companies, their upstream and downstream partners, and financial institutes.

"Supply chain finance involves multiple data sources and needs diverse risk control methods, which poses challenges for small and medium-sized banks," said Gao Fan, chief security officer of OneConnect, adding risk control means to ensure the companies can pay back the money, which is why application of advanced technologies, such as big data analysis, can better judge their loan repayment ability.

Fei Yiming, CEO of corporate finance at OneConnect, said the new platform uses blockchain and artificial intelligence to secure the authenticity of information from different participants in the supply chain, to improve information asymmetry in banks and companies.