To participate in the future competition, small and medium-sized banks actively participate in the digital transformation has become a necessary option.

In the tide of financial digital transformation, the leading role is not only the big state-owned banks, small and medium-sized banks are also active on the stage.

Minfeng Rural Commercial Bank, based in Suqian, Jiangsu province, is one of them. The predecessor for the local bank of rural credit cooperatives, total assets of more than 400 one hundred million yuan, only 12 people rely on a scale of the development team, through the use of digital technology on the cloud platform, monthly investment only 10000 yuan, is made up of fast digital, online business development, for the steady and fast growth of bank performance made an important contribution.

In the past, many local small and medium-sized banks, such as Minfeng Rural Commercial Bank, have decentralized operation mode and high degree of manual operation, and their marketing clients are mainly based on field visits and network promotion. However, since the outbreak of COVID-19, the demand for “contactless” financial services and digital operations has increased exponentially, making it particularly urgent for local small and medium-sized banks to improve their digital capabilities.

Most of the small and medium-sized banks have realized that they need to carry out reform and digital transformation. However, under the rigid constraints of limited capital investment, lack of talents and lack of scientific and technological strength, how should they go on this road of transformation? Most organizations don’t have clear answers.

As a local legal entity financial institution rooted in northern Jiangsu, Minfeng Rural Commercial Bank also faced the above difficulties, but through a reform started in 2016, it gradually explored a unique path of inclusive finance development and digital transformation. This path may bring some enlightenment to small and medium-sized banks in need of reform, especially those based in county areas.

The “Minfeng Model” of Inclusive Finance

When it comes to Jiangsu, many beautiful and delicate pictures will come to mind — villages with small Bridges and flowing water, Taihu Lake with shining sails and shadows, ancient winding canals, ancient towns with white walls and black tiles… But most of these pictures are actually related to South Jiangsu, where trade is developed.

Because of the unbalanced development of regional economy in Jiangsu Province, it is often said that “Southern Jiangsu is rich and Northern Jiangsu is poor”. Suqian City, located in the north of Jiangsu, is between the south of Shandong Hills and the north of Jiangsu Plain, called “Zhongwu” in ancient times, is the hometown of Xiang Yu, the overlord of the West Chu. The city is now known more for the successful entrepreneur Liu Qiangdong. According to the current method of city classification, Suqian is a third-tier or fourth-tier city.

Suqian is a typical agricultural city and a large grain producing area in Jiangsu Province, which determines that the local Minfeng Rural Commercial Bank serves large number of farmers with small loan amount, and is the real main force to support “agriculture, rural areas and farmers”.

In July 2016, Xu Erbo, who was transferred from Shuyang Rural Commercial Bank to Minfeng Rural Commercial Bank and served as the chairman, began to reform the traditional credit service management mode as soon as he took office, realized the complete separation of “three channels and six posts” of credit, and solved the contradiction between development and risk in the credit business in the past from the perspective of mechanism construction.

Under the traditional credit development mode, credit personnel implement the life-long responsibility system of “guaranteeing release, guaranteeing receipt and guaranteeing management”. Simply put, it is to the customer’s loan immediately inserted in the end.

Under the rural acquaintance model, this model does play a role, but the drawback of this model is that the quantity mismatch between bank credit officers and a large number of scattered customers and the resulting information asymmetry result in passive bank service, low efficiency, and easy to cause the risk of black box operation.

The reform of Minfeng Rural Commercial Bank starts from the improvement of post function and process, and puts forward the mode of “three posts and six posts”.

Concrete practice is, in the traditional credit process within the framework of “three stage” create “small three”, the marketing and research as a “small desk”, approval and signing as a “little China”, the executive and collection as “a little backstage,” six big jobs do their job, efficient collaboration, checks and balances, a full-time, streamline, standardized operation flow, Make sure “professional people do professional things”.

The implementation of the mode of “Three Taiwan and Six Gangs” has activated the vitality of the team of Minfeng Rural Business Bank and achieved remarkable results. In the four years since the implementation of the reform, the Bank has accepted 130,000 credit applications, and the average credit duration is only 1.2 days. The efficiency of examination and approval is more than three times higher than before the reform. At present, the total number of credit customers has exceeded 80,000, and the loan balance exceeds 23 billion yuan, an increase of 25,000 households and 8.7 billion yuan respectively compared with the beginning of the reform, with an annual growth rate of more than 10%.

This successful experience was later known as the “Minfeng mode” in the industry, dozens of rural commercial banks came to learn and exchange experience. The people rich farming firm also did not hide the yuck, will successful experience to share all.

In the view of Xu Erbo, who pioneered the model at Minfeng Rural Commercial Bank, the model is “completely feasible” to be extended and replicated in other regions and in rural credit institutions. However, he added an important premise: “The bank’s senior executives, especially the chairman, need to be strong in their strategic positioning and bold enough to execute and implement it.”

Take the lead in starting online business

Resume “three Taiwan six posts” model can be carried out smoothly, Min Feng rural commercial bank for the coverage of Suqian rural areas of the credit project can be said to be very important. As early as 2009, Minfeng Rural Commercial Bank started the centralized credit granting activities of farmers’ loans, and finally realized the credit granting to nearly 260,000 farmers’ families within its jurisdiction with a total amount of more than 15 billion yuan.

After all the area covered by the credit, customer manager don’t need to go from one offering door-to-door credit, lending, not only control the credit risk and operation risk, also took them from the multifarious pressure of the management, marketing development strength has been greatly released, can effectively solve the inherent conflict between risk and efficiency.

Of course, behind this, the supporting role of the power of science and technology has to be mentioned. At the end of 2016, while Min Feng Rural Commercial Bank is reshaping the process of credit business, a reform to promote online business is also being planned in full swing.

“After the bank started the mode of three stations and six posts, our Ministry of Science and Technology at that time thought, what role can it play?” Wang Xiaotao, the R&D manager of Minfeng Rural Commercial Bank, recalled the situation at that time and said, “At that time, Minfeng Rural Commercial Bank’s credit customers reached more than 600,000, but about 40% of the customers actually used the credit line. We have been thinking about how to leverage the remaining 60% of customers.”

At the end of 2016, the digital transformation of China’s banking sector was not as deep as it is today, and even some of the biggest banks in Jiangsu province were just getting started on mobile. However, it was not long before the idea of online credit business was reported by the Department of Science and Technology and the Sales Department of the Minfeng Rural Commercial Bank. The top management of the bank received a very positive reply — feasible.

No sooner said than done. After emergency research, project approval, bidding and other procedures, a technology outsourcing company hired by Minfeng Rural Commercial Bank developed an APP with only online credit function — “Suzuo E” in June 2017. Wang Xiaotao said that because there were no similar online credit products in the same industry in Suqian, and there were a lot of preferential interest rates, the user growth and credit application volume were very large at that time.

The reason behind this is simple: online business has brought great convenience to loan customers and the marketing managers in the bank.

Suqian is a large city of labor output in northern Jiangsu, and a large number of young people in rural areas go out for work. Before did not promote business online, working people if you need to apply for a loan, need to run back, submitted to the bank counter material, but also to find one or the guarantor, now on the phone to download the App, relying on data intelligent analysis technology, the user complete registration certification, can apply for signing, instant, real-time online lending, the whole process only needs 5 minutes. Before, the customer manager to prepare this set of basic materials at least need more than 30 minutes.

Needless to say, the Minfeng Rural Commercial Bank’s “Suzuo E” App has become a hit in the provincial banking system.

Independent innovation on the cloud

Neighboring banks were also quick to respond and actively launched mobile banking apps to promote online business. “The outsourcing company that provided our services received six or seven requests to develop apps at once. The company had limited manpower, and when they saw that our system was stable, they asked to withdraw,” he said.

Outsourcing companies withdrew, but “Suzuo E” products must continue to optimize and expand functions, which gave Wang Xiaotao, who had no experience in front-end APP development, a big problem. “As the person in charge of the whole project, after the outsourcing company leaves the site, what I care about most is how to ensure the continuity of the product, but our staff is very limited.”

All of a sudden, what had been a promising App became a bit of a hot potato. At that time, “SuSuo E” was only launched on Android, and according to the plan, we would develop an iOS version. “We are weak in the mobile development side, so we can’t rely on only one person, and if we need to deploy two people on each side, we don’t have enough manpower.” Wang Xiaotao said.

Weak technical force, manpower shortage, this is a wide range of small and medium-sized banks in the predicament, Minfeng Rural Commercial Bank is no exception. Although the bank uses technology outsourcing companies to drive business innovation, in most cases, the outsourcing companies actually have a hard time understanding exactly what the bank is thinking, resulting in the subsequent development of products that do not meet the needs of the bank.

In short, the outsourcing technology model, while good for controlling costs, is inefficient and sometimes misses market opportunities.

It is under such pressure that the Agricultural Bank of China has come across the MPAaS mobile application development suite that has just been commercialized on AliCloud. MPAaS suite is a set of mature financial mobile terminal development solutions, which supports the national APP 12306. It can develop multiple terminals at a time, help financial institutions quickly build stable and high-quality mobile applications, and carry more businesses on mobile terminals.

As one of the main technical products of Aliyun New Finance, MPAAS has served a number of financial institutions such as Agricultural Bank of China, Guangfa Bank, Huaxia Bank, Bank of Xi ‘an, Bank of Nanjing, Guangdong Rural Credit and China Life Insurance, greatly increasing the activity of customers and the average daily trading volume.

“After I saw the product on Aliyun, I had an in-depth understanding of the product’s functions and introduction documents, which is in line with our situation.” Wang Xiaotao said, plus mPaaS products technical team dedicated to training suqian, and on the nail at any time to help us solve the problem, although our own engineers had no experience in mobile terminal application development, but through the study, soon to fit, write little or no code, by dragging drag the corresponding function module can develop mobile applications.

At the beginning of 2018, Tang Tian, an engineer of Aliyun MPAAS who just got out of the 12306 project, came to Suqian after taking a taxi after the high-speed train. The problem in front of him is the need to help the firm quickly solve the weak technical force, manpower shortage and structural restructuring to find a balance between unity.

Tang Tian had to dive into the project to help the Minfeng team modify the code, locate the problem, and streamline and optimize the code. “It was amazing how eager the customer was to learn,” Tang recalls. “They were the first to try out the new capabilities that MPAaS introduced in subsequent iterations.”

With the support of the MPAaS product technical team, Minfeng Rural Commercial Bank was able to completely restructure the App by the end of 2018, resulting in a smoother on-end experience and a very low flashback rate. In the second year, I also used the popular “small program” to build a series of ecological functions, from payment code and code scanning payment function to new scene functions such as living payment, ticket shopping, Tmall optimization, etc. Through my own independent operation, I realized the customer acquisition and live customer of mobile terminal APP.

During the epidemic period of this year, due to the control of bank outlets, the offline loans of Minfeng Rural Commercial Bank decreased a lot compared with the same period. However, thanks to the early online deployment of the business, the online loan business grew contrary to the trend, reaching more than 400 million yuan.

People Feng Rural Commercial Bank newly launched the establishment of 9 rural banks due to not timely promote online business, “during the epidemic basically no amount of loans.” Knowing such a situation, Wang Xiaotao led a scientific team to help them develop an online loan portal in just over a month.

Now, mobile apps are starting to take on more of the business. With the “Suzuo E” mobile APP loan service platform as the carrier, Minfeng Rural Commercial Bank has successively launched a variety of online credit loan varieties such as “NongeDai”, “RongeDai”, “ShangeDai” and “KuaieDai”. This year, about 40 percent of banks’ loan business will be carried on mobile devices, and that proportion will grow further in the future, according to Minfeng.

However, the development, operation and maintenance team behind this achievement is only 12 people so far, and the annual investment in Ali Cloud MPAAS public cloud is only more than 100 thousand yuan, the average monthly investment is only more than 10 thousand yuan.

As a rare MPAaS public cloud customer in the banking industry, Wang Xiaotao is eager to recommend this suite to Jiangsu Rural Credit Cooperatives Association to build a unified proprietary cloud in the whole province. He went several times to lobby the leaders of the provincial union in charge of mobile banking, and his lobbying style was straightforward: ‘Look, we’ve accomplished so much with so many people!’

Sample significance of digital transformation

From the perspective of the breadth and depth of financial services, banks such as Minfeng Rural Commercial Bank are the main force of financial services in the county, and have made significant contributions to the service of county economic development and financial support for rural and small businesses. Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, stressed that county finance is an important part of China’s financial system and can only be strengthened but not weakened.

However, in order to participate in the future competition, small and medium-sized banks actively participate in the digital transformation has become a necessary option. But a cruel fact is in front of us, compared with the city firms, stock banks, big banks and other peers, their digitalization has greatly lagged behind, the situation is very grim.

In October 2020, a special survey conducted by the Internet Finance Association of China showed that in terms of digital transformation, compared with large and medium-sized banks and new Internet banks, local small and medium-sized banks are generally in the initial exploratory stage. The average score of digital capability of small and medium-sized local banks in the survey was 2.75 (out of 5), which was significantly lower than that of large and medium-sized banks (3.41) and new Internet banks (3.87).

In fact, in recent years, there are many similar rural commercial banks to visit the People Feng Rural Commercial Bank, to learn. And the people Feng farm firm also always takes pains to share the practice and experience of innovation on Ali cloud. There are two brothers who are interested to give the task of App development directly or even directly to them.

Wang Xiaotao are still in the lobby of jiangsu provincial its association’s leadership, hope in jiangsu province local rural credit cooperatives can use a technology platform, more than 50 in the province rural credit cooperatives only need to put their own business in the form of a small program in this big platform, digital transformation can be realized, the common means to participate in the fierce market competition. “Provincial associations also want to change the technical architecture, and we have been trying to push them to change.” “This is my biggest goal in the short term,” laughs Wang.

At the end of last year, Min Feng Rural Commercial Bank had considered joint Ali cloud together to do a small and medium-sized bank digital transformation forum, to the national regional small and medium-sized banks, introduce the experience of digital transformation in the cloud, but because of the outbreak of the epidemic suddenly, the plan ran aground.

“Our model is completely replicable.” Wang Xiaotao said that the key to replicate success lies in the top level of the leader’s assertiveness and the bottom level of the team’s willingness to do things. He also believes that small and medium-sized banks should have a long-term plan for digital transformation and find an excellent technology platform to support business development. “Building a wheel from scratch is not in line with the needs of small and medium-sized banks to iterate quickly.”

Today, the environment for small banks has changed radically compared to a few years ago. Economic growth has slowed sharply, interest margins are narrowing further, while large and medium-sized banks are sinking through digital means to further win over customers in their regions… The model of Agricultural Bank of Minfeng may be a good way to learn how to break out of the “failing” digital ability of small county banks and continue their leading position in the region.

This article is taken from China Electronic Banking Network

Editor in charge: Wang Chao

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