KGI Bank (凱基銀行) yesterday said that its financial technology (fintech) sandbox experiment, which allows consumers to apply for small loans via mobile devices, has been going well and has helped attract new clients who have no credit record.
“So far, we have not detected any cases of fraud or money laundering using this mechanism, which proves that our system is realiable,” KGI Bank spokeswoman Janet Sheng (盛嘉珍) told the Taipei Times at a media briefing in Taipei.
The Financial Supervisory Commission has said that the experiment would have to stop if four cases of fraud were detected.
The lender, a subsidiary of China Development Financial Holding Corp (中華開發金控), began the experiment in December last year in cooperation with Chunghwa Telecom Co (中華電信).
Thanks to mobile identity authentication technology, the experiment allows borrowers to apply for loans online.
KGI said it does not see the experiment as a main engine to expand its lending business, which can only provide a total of NT$200 million (US$6.47 million) in loans.
The bank saw lending increase by NT$3 billion in January, with aggregate lending reaching NT$343.49 billion as of Jan. 31, Sheng said.
However, through the experiment, the bank expects to reach customers that are new to financial services as it aims to promote inclusive financing, she said.
So far, 20 percent of applicants in the experiment are people with no bank accounts or credit records — those who have had difficulty taking out loans, Sheng said.
Although the commission agreed that each borrower could take out loans of up to NT$500,000, the bank found that most applicants requested smaller loans of less than NT$300,000, she said.
“Many young customers just needed a loan of NT$50,000 or NT$70,000, as they did not have enough cash to meet their needs or they needed help to pay a high-cost item such a scooter,” Sheng said.
KGI rejected some applicants who had bad telecom payment records, which were used to evaluate loan applications and determine interest rates, she said.
“We believe that how you treat your phone bills reflect your attitude toward debt. If you are always late in paying telecom fees, you are unlikely to be a good borrower,” Sheng said.
The one-year experiment is expected to end in December.
The commission is expected to amend banking regulations and allow all local banks to do this type of business if the experiment proves to be successful.
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