Image source: Hong Kong Commercial Daily

MicroBank, in conjunction with Caixin Think Tank, released the “China Digital Inclusive Finance Development Report” on December 20th. The report shows that China's mobile payment penetration rate has reached 86%, ranking first in the world, demonstrating China's leading position in digital inclusive finance. The report comprehensively shows the development history and achievements of China's digital inclusive finance through in-depth analysis of industry practices and financial institutions' cases. 

Digital Inclusive Finance Drives Inclusive Growth 

Driven by digital technology, China's inclusive financial services have achieved a shift from single credit to comprehensive services, and a leapfrog development from digitalization to digital intelligence. This shift has not only significantly improved the financing environment for small and micro enterprises, but also driven the overall efficiency of financial services.

According to the data, as of the second quarter of 2024, the balance of loans to MSMEs by banking financial institutions reached RMB 78 trillion, an increase of 233% from the end of 2018, highlighting the important role of digital inclusive finance in supporting the development of the real economy.

Image source: Hong Kong Commercial Daily

In recent years, the development of digital inclusive finance in China has been characterized by diversification, integration and openness. Mobile payment tools, represented by Alipay and WeChat Pay, have penetrated into every aspect of Chinese residents' daily lives, from street stores to large-scale superstores, and from cities to rural areas, greatly enhancing payment efficiency and the degree of inclusion. Meanwhile, banking financial institutions have exported technical solutions to small and medium-sized banks through their fintech subsidiaries, effectively lowering the threshold of digitization and promoting the sinking of inclusive financial services. 

Multi-dimensional Integration Promotes Inclusive Financial Innovatio

With the development direction of “five major articles on science and technology finance, green finance, inclusive finance, pension finance and digital finance” put forward at the Central Financial Work Conference in 2023, the innovative practice of digital financial inclusion has been further deepened.

In the field of science and technology finance, traditional banks have realized the accurate portrait and credit assessment of small and micro enterprises through the establishment of intelligent risk control models, significantly improving the efficiency of credit approval. For example, some large state-owned banks have launched credit products specializing in serving science and innovation enterprises, which provide more accurate financing support for science and innovation enterprises by analyzing their patents, R&D investment and other indicators of scientific and technological innovation. 

In terms of retirement finance, the promotion of digital age-friendly services has enabled the elderly to enjoy financial services more conveniently. A number of banks launched large-print APPs and voice navigation services, which greatly enhanced the accessibility of financial services for the elderly.

In the field of green finance, the banking industry has innovatively developed digital tools such as carbon accounting and ESG assessment to help small and micro enterprises realize green transformation and promote the deep integration of inclusive finance and sustainable development.

Building a Multi-Level Ecosystem of Inclusive Finance

Driven by fintech, China's banking industry is forming a new pattern of synergistic development among large commercial banks, small and medium-sized banks and digital banks. Relying on their capital and network advantages, large commercial banks are focusing on building intelligent service platforms; small and medium-sized banks are relying on their localization advantages and plowing into special markets; and digital banks, as innovation leaders, are exploring unique models of inclusive financial services.

Taking MicroBank as an example, as of the end of June 2024, it has cumulatively served more than 400 million individual customers and more than 5 million MSME customers. Through the open banking strategy, data interconnection among financial institutions has been strengthened, forming a service ecology of resource sharing and complementary advantages. Meanwhile, the promotion of open source technology has further lowered the threshold of fintech application and promoted the innovative development of inclusive financial services.

With the deepening development of digital inclusive finance, the industry faces the challenge of balancing innovation with risk prevention and control. On the one hand, it is necessary to continue to strengthen data security and consumer rights protection, and establish a sound digital financial risk prevention and control system; on the other hand, it is necessary to continue to promote fintech innovation and optimize the service supply model.

Under the ESG development framework, digital inclusive finance is helping social equity and sustainable development by enhancing the accessibility and inclusiveness of financial services. In the future, with technological innovation and institutional improvement, China's digital inclusive finance is expected to play a more important role in serving the real economy and promoting common prosperity. Especially in the context of the implementation of the rural revitalization strategy, digital inclusive finance will inject new development momentum into rural areas, promote the equalization of urban and rural financial services, and provide strong support for China's high-quality economic development.

Editor's Notes:

China's development achievements in digital inclusive finance are remarkable, especially the 86% mobile payment penetration rate demonstrates a strong capability of inclusive financial services. From an ESG perspective, this development is not only reflected in the “social” dimension of financial inclusion, but also in the “governance” dimension, through digital means to improve the transparency and efficiency of financial services. It is worth noting that digital inclusive finance is deeply integrating with green finance, playing an active role in the “environment” dimension by supporting the low-carbon transformation of small and micro enterprises. This multi-dimensional development model provides good experience for the digital transformation of global inclusive finance. In the future, China's digital inclusive finance is expected to continue to lead the global development trend in the balance between service model innovation and prevention and control.