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Using big data and AI, Chinese fintech startup Quant Group simplifies and accelerates loan processing, and assures monetary security for financial institutions

When Zhou Hao returned to China after working for more than a decade on Wall Street, he was stunned to discover he could not get a personal loan from a Chinese bank. Even though Zhou held multiple gold credit cards in the United States, his loan applications were rejected because of his limited domestic financial record.

Zhou, who has a doctorate in Physics from Rice University, realized not only that, due to insufficient data, the way banks had traditionally evaluated one’s financial capacity and personal credit was flawed, but also that there must be many other people struggling to obtain loans. Furthermore, the procedure for loan approval was overcomplicated, and, due to a lack of flexibility on the part of banks, the process often took weeks or even months. Zhou, who had worked for Morgan Stanley, Capital One and Barclays, decided to set up his own business to fix the system and meet the market demand for loans. In 2014, he founded Quant Group, which has quickly become one of the most influential fintech companies in China.

Loans safer, faster, easier

While potential borrowers are forced to undergo a thoroughly unpleasant process by traditional Chinese banks in order to receive approval for personal loans, the online application Credit Wallet, a pilot product made by Quant Group, allows users access to small loans of up to RMB 10,000 with only a few inputs and clicks.

By collaborating with major e-commerce channels and online payment outlets such as Taobao and WeChat Pay, Credit Wallet, with the user’s permission, creates a financial profile based on data obtained from one’s online purchasing records, behaviors and credit history. Through its built-in big data based AI algorithms the application estimates the likelihood and the ability of the user to repay loans.

“Traditionally we make judgments based on our past experience but that’s largely limited by one’s access to information and level of personal knowledge, thus it’s often too subjective. On the contrary, a model combining the strength of data and machine learning can be much more accurate and efficient,” said Zhou in a recent interview.

Credit Wallet acts as an intermediary between individuals and financial service providers of small, short-term personal loans. The application generates accurate and thorough risk analysis reports and shares them with partner financial institutions, which allows the institutions to make better, faster, low risk decisions about whether to grant loans to users of the application. Working class people in particular have benefitted from the faster loan process and flexibility. Credit Wallet helps them achieve their goals, whether they are to study abroad, to travel to a nearby exotic island or to set up a small business. According to Zhou, loans from Credit Wallet can be granted in as little as 10 minutes, and the average approval time is 13.3 times faster than that of traditional banks.

Credit Wallet also helps borrowers get loans at lower interest rates by negotiating deals with financial institutions on their behalf. Based on one’s spending history, personal credit and the size of the loan, the interest rate can be as low as 0.78%, which is much lower than the 7%-10% rate banks charge.

Within only two years, the number of monthly transactions on Credit Wallet has reached RMB 1 billion, and the number of users has grown from in the thousands to over 10 million.

Steady capital injection

According to Qianzhan.com, a leading Chinese industry research institution, total internet consumption in China had reached RMB 998.34 billion by 2017 and is estimated to reach RMB 1,942.89 billion by the end of 2018.

And Quant Group is ahead of the curve, which has translated into significant capital gains. The first fintech company in China to use big data and artificial intelligence to control financial risk, it has been favored by many big investment groups since the beginning. In 2014, the company was selected to join the Microsoft Cloud Accelerator project. That same year, the Quant Group raised an undisclosed amount of series A financing from Fosun Kinzon Capital, Banyan Capital and China Grow Capital and of series B financing from Zhixin Capital, Star VC and Oriental Fortune Capital, among others. Notably, Star VC was founded by a group of Chinese movie stars, including Ren Quan, Li Bingbing and Huang Xiaoming.

In 2016, Quant Group raised RMB 500 million in Series C financing from Sunshine Insurance Group Corporation, Fosun Capital and Guosen Hongsheng Investment Co., Ltd.

With such a strong and continuous injection of capital, Quant Group has achieved steady growth and is planning an initial public offering in New York for the near future. Meanwhile, the company continues to study big data and deep machine learning in order to improve its services and stay ahead of the competition.

Regulation, data privacy concerns

Despite last year’s harsh increase in governmental regulations, the fintech industry in China still has the potential to make serious waves. However, in the wake of the Cambridge-Analytica scandal, serious concerns over breaches of personal data during online transactions have been raised both by the media and by the public. This new distrust might have a serious impact on the number of people willing to use fintech platforms.

But Zhou remains confident. He believes that improving technology and services will benefit everyone: “Certainly, technology cannot kill or change human nature. However, it can add value to different industry verticals as well as to an individual’s life. With Quant Group’s model, we empower people who have excellent personal credit by providing them with more convenience, benefits, respect and self-esteem.”

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Edited by Wang Xinlei

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