While Chinese lenders tend to be reluctant to offer loans against moveable assets, a company in Wuxi, Jiangsu province, claims it has found a solution that helps to dramatically reduce risks of fraud. The solution is a financial network integrating internet of things technologies.
In August, World Sensing Net Group launched an IoT financial service platform, the first of its kind in the world, and said it could soon be used across the broad spectrum of China's financial sector, from insurance to securities.
The platform gives lenders more security on loans tied to moveable assets such as cars, machinery or raw materials, said Liu Haitao, WSN’s chairman and a national IoT chief scientist.
"Lenders in China have been averse to lending against these assets because they are difficult to monitor, and therefore the risk of fraud or default is higher,” Liu said.
Around 60 to 70 percent of short-term loans in developed economies are made against moveable assets, but in China the percentage is much lower.
The World Bank estimated that China has moveable assets worth 70 trillion yuan ($10.4 trillion) in total, but the value of loans against moveable assets stands at only 5 trillion yuan.
As a result, there is huge potential for growth in this market in China, and WSN is convinced that its platform will give lenders the security to relax their restrictions on these kinds of loans, Liu said.
The platform's IoT technology enables lenders to trace and monitor moveable assets in real time through a variety of sensors, giving the lender accurate information about the assets at all times, he said. For example, a bank will be able to track a car which is being used as collateral against a loan in real time, and if the car makes an unusual journey, the bank will automatically receive an alert.
The IoT platform is much more objective and accurate than online funding and traditional finance, which often use subjective risk assessments. Moreover, because the data is input automatically rather than by humans, the platform eliminates the risk of cheating, said Liu. Ping’an Bank’s Wuxi branch was among the early explorers testing the waters of IoT finance. It teamed up with WSN in 2014 in auto collateral loans, where it applied IoT technology for thorough supervision of vehicles.
Guan Yuehong, the bank's president, is optimistic about IoT technology being used in more financial sectors. "The IoT financial platform will be used in the future to regulate bulk commodities, boosting the development of moveable assets loans."
With the new platform, financial risks will be greatly limited and banks will be more willing to expand their business in movable property loans, hence increasing their revenue, Guan said.
Liu echoed her opinions by saying that the development of IoT finance will also make it much easier for small and medium-sized enterprises to raise funds.
WSN developed the IoT platform in collaboration with nine banks and an insurance company, with the aim of creating a platform that integrates all kinds of financial services, including investment, financing and insurance, Liu said.
He said he also believes that IoT technology can transform China’s finance sector even further. "IoT will promote the development of China's entire finance industry, giving the country a greater voice in issues related to the global financial system," Liu said.
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| Liu Haitao (second from left), chairman of World Sensing Net Group, demonstrates technologies to his team. PROVIDED TO CHINA DAILY |
