1

Executive Summary:

In this case analysis, the overview of MYbank's strategic landscape and recommendations for

sustainable growth are outlined. Established in 2015, MYbank, an Ant Financial venture, focuses

on inclusive financial services for rural entrepreneurs, utilizing advanced technology and a

unique "310" lending model. Facing competition in the evolving online banking sector,

MYbank's competitive advantage lies in quick approvals, low operating costs, and high

repayment rates. The case analysis emphasizes the importance of diversifying funding sources,

particularly through Peer-to-Peer (P2P) lending, to mitigate interbank reliance.

Recommendations include market expansion, operational cost reduction through AI adoption,

enhanced financial guidance, proactive risk management, and aligning with government

initiatives. Integration of AI-based anti-money laundering measures is proposed. These strategies

aim to strengthen MYbank's market position, foster customer relationships, and ensure resilience

in a dynamic financial landscape, supporting sustainable growth and a robust financial future.
 2

Background and Vision of MYbank: MYbank was established in 2015 by Ant Financial with a

focus on using technology, data analytics, and AI to provide inclusive efficient financial services

to rural entrepreneurs. The vision of MYbank is aligned with providing financial inclusion and

empowerment to small business borrowers in rural areas.

Industry Landscape: MYbank faces competition in the online banking sector, notably from

Tencent-backed WeBank and other private online banks. The sector is evolving, with a shift

towards sustainable banking services and a focus on the triple bottom line of People, Planet, and

Profit.

Strategic profile:

Mission: MYbank strives to empower through accessible financial services, leveraging

technology for inclusive growth.

Vision: Envisaging a digitally transformed future, MYbank aims for positive societal impact

through innovation and responsible practices.

Objectives: MYbank focuses on expanding financial inclusion, supporting green finance,

empowering women entrepreneurs, and leveraging technology for efficiency.

Competitive Advantage: With the "310" lending model, MYbank excels in quick approvals,

lower costs, and higher repayment rates, outperforming traditional banks.

Market Position: A frontrunner in online banking, MYbank holds a key market position,

recognized for ESG commitment and pioneering financial solutions in China.

Purpose of Analysis: The case analysis purpose for Ant-backed MyBank revolves around its

strategic approach to capturing the rural market in China. By implementing the 310 lending

model, the focus on speedy loan disbursement with a high value proposition, low administrative

costs, and maintaining satisfactory profit margins illustrates a business strategy geared towards
 3

efficiency and customer satisfaction. Recognizing the future surge in food demand, the alignment

with the government's red line policy, and leveraging online banking as a cost-effective solution

demonstrate MyBank's commitment to financial inclusion in areas where traditional banks face

challenges. The strategy not only caters to rural individuals engaged in farming, SMEs, and the

supply chain but also aligns with the government's economic goals. Additionally, the

incorporation of an AI-based financial model internally enhances credit risk management,

mitigating Non-Performing Loan (NPL) risks in the evolving business landscape. Overall,

MyBank's strategy reflects a comprehensive approach to aligning with economic trends and

governmental objectives for sustainable growth.

Porter's Five Forces Analysis for MYbank:

1. Threat of New Entrants: (Low Threat): The financial industry has high entry barriers

due to stringent regulations, capital requirements, and the need for advanced technology.

MYbank's technological sophistication and established market presence create a deterrent

for new entrants.

2. Bargaining Power of Buyers (Customers): (Moderate to High Power): Customers,

particularly SMEs and farmers, have choices in the financial market. However, MYbank's

innovative products, competitive interest rates, and efficient loan approval processes can

moderate customer bargaining power.

3. Bargaining Power of Suppliers: (Low Power): Suppliers in the financial industry, such

as technology providers or funding sources, typically have low bargaining power.

MYbank's use of advanced technology both from third party and its in house department

and diverse funding sources reduces dependency on specific suppliers.

 4

4. Threat of Substitute Products or Services: (Moderate Threat): While traditional

banking services are substitutes, MYbank's focus on digital innovation, AI-driven risk

assessment, and tailored financial products reduces the threat. However, emerging fintech

solutions pose a moderate threat.

5. Intensity of Competitive Rivalry: (High Intensity): The financial industry is highly

competitive. MYbank faces competition from emerging fintech players, and other online

banks. Differentiation through technology and innovative services as well as pricing

strategy for high turnover are crucial to maintaining a competitive edge.

External Environment Analysis:

Scanning: MyBank employs robust scanning mechanisms, utilizing over 100,000 risk profiling

metrics, satellite image and AI algorithms that analyze diverse data sources, including e-

commerce platforms and government records. This extensive scanning enables the bank to

identify market trends, customer preferences, and potential risks, ensuring proactive decision-

making.

Monitoring: Through continuous monitoring practices, MyBank tracks key performance

indicators like loan approval rates, non-performing loan ratios, and operational costs. This real-

time monitoring provides the bank with agility, allowing it to swiftly adapt to changing market

conditions, optimize processes, and maintain a competitive position.

Forecasting: MyBank leverages sophisticated forecasting models, including AI-based risk

assessments and predictive algorithms. By analyzing historical data and market trends, the bank

can anticipate future customer behaviors, economic shifts, and industry developments. This

forecasting capability enhances strategic planning and positions MyBank for long-term success

in the dynamic financial landscape.

 5

Assessing: MyBank conducts thorough assessments of its competitive position, regulatory

landscape, and customer satisfaction. These assessments enable the bank to identify strengths,

weaknesses, opportunities, and threats, informing strategic decisions. MyBank's commitment to

continuous assessment ensures it remains resilient in a rapidly evolving external environment.

PESTEL Analysis:

1. Political: a. Privatization policies to incentivize farmers.

b. Regulatory control and oversight on data sources and digital currencies.

c. Government initiatives supporting inclusive finance and rural

entrepreneurship.

2. Economic: a. Economic impacts of the COVID-19 pandemic affecting SMEs, leading to

increased demand for financial support.

b. Inclusion of rural farmers and SMEs in the financial system contributing to

economic development.

3. Social: a. Changing consumer behavior with a shift towards digital financial services.

b. Emphasis on CSR initiatives, including support for women entrepreneurs and

disaster relief efforts through launching interest free coupon.

4. Technological: a. Integration of AI, satellite, blockchain, and deep learning in financial

services.

b. Adoption of digital technologies for supply chain financing, risk

assessment, and farmer loans.

 6

c. Through AI based financial model, My bank can keep their NPL( Non-

performing loan) ratio below 1 by evaluating consumers credit history from all

aspect.

5. Environmental: a. MYbank's focus on green finance, including preferential rates for

environmentally-friendly SMEs.

b. Use of technology for sustainable agriculture and traceability in the

supply chain.

6. Legal: a. Compliance with financial regulations and data protection laws.

b. Legal considerations related to the introduction of digital currencies and their

impact on the banking sector.

SWOT Analysis of MYbank:

Strengths:

 Advanced AI Model: Utilizes a sophisticated '310' lending model with over 100,000 risk

metrics.

 Data Utilization: Comprehensive use of diverse data sources for robust risk assessment.

 Operational Efficiency: High loan approval rates and low non-performing loan ratio,

ensuring efficiency.

 Innovation: Introduction of innovative products and successful market penetration in

SME lending.

 Technology Integration: AI and satellite tech for farmer loans, contributing to agricultural

development.
 7

 Operational cost : Low operational cost due to not having any physical branch.

Weaknesses:

 Interbank Funding Reliance: Heavy reliance on interbank funding, as a result cost of

deposit is high .

 Rural Finance Challenges: Initial issues in rural finance division, including bad debt

accumulation due to reliance on the data base of ALIBABA Tobaco for the consumers

credit history.

Opportunities:

 Rural Market Expansion: Success in rural finance creates opportunities for further

expansion.

 Government Support: Aligning with government initiatives for inclusive finance and

sustainable agriculture. Such as - Red lines” policy to protect the country’s farmlands

from industrial encroachment.

 Technological Advancements: Leveraging ongoing tech advancements to enhance risk

assessment.

Threats:

 Competition: Increasing competition in financial services sector, risking erosion of

competitive advantage.

 Regulatory Changes: Evolving regulations in data privacy and finance may pose

compliance challenges.
 8

 Economic Risks: Economic downturns and market uncertainties can impact loan demand

and borrower financial health.

 Technology-Related Risks: Risks associated with AI and satellite tech, including

cybersecurity threats and technological failures.

Competitive Advantage of MYbank:

MYbank's sustainable competitive advantage lies in its valuable, rare, costly-to-imitate, and non-

substitutable capabilities, positioning it uniquely in the competitive landscape.

Valuable Capabilities:

 Digital Innovation: MYbank's utilization of advanced technologies like large-

scale graph computing, multimodal recognition, blockchain, and deep learning AI

is a valuable capability. The "Goose System" that integrates traditional supply

chain finance with cutting-edge technologies provides an efficient solution,

helping the firm neutralize threats and exploit opportunities in the digital era.

 Inclusive Financial Services: MYbank's focus on inclusive finance for SMEs,

rural farmers, and small operators is a valuable capability, addressing a market

segment traditionally underserved by conventional banks.

Rare Capabilities:

 Supply Chain Financing Expertise: The implementation of the (1+ N2) solution in

MYbank's supply chain finance model is a rare capability, distinguishing the bank

from competitors.

Costly-to-Imitate Capabilities:

 Environmental, Social, and Governance (ESG) Commitment: MYbank's ESG

strategy, with a focus on green finance management and social responsibility, is a

 9

costly-to-imitate capability. The "green evaluation system" identifying

environmentally-friendly SME lenders provides a unique advantage that is not

easily replicated by competitors. ESG/CSR will help to create the brand value

because of aligning with people, profit and planet. Although the operating cost

might be increased, but it could be nullify by grabbing more market share and

having high turn over.

 Implication of CSR/ESG: Targeting rural communities in China, MyBank can

leverage CSR/ESG initiatives to provide benefits to the Bottom of the Pyramid

(BOP). This fosters customer loyalty, aligning with the company's mission. The

low operating cost of MyBank, compared to traditional banks, enables effective

CSR cost adjustment, creating a sustainable and socially responsible business

model.

Nonsubstitutable Capabilities:

 Customer-Centric Approach: MYbank's digital governance system emphasizing

personal data privacy protection and customer-centric services, such as the "zero-

payment-day" and interest-free loans during floods, represents nonsubstitutable

capabilities. The emphasis on trust and relationships among managers, suppliers,

and customers adds a layer of social complexity that makes it challenging for

competitors to replicate.

 Women Entrepreneurship Support: MYbank's active promotion of women

entrepreneurship through digital financing, skills training, and community

building is a nonsubstitutable capability. Over 50% of MYbank loan recipients

being women entrepreneurs contributes to gender inclusivity, which is not easily

replicated by other institutions.

 10

Alternatives Analysis:

To address the critical need for funding diversification beyond interbank channels, MYbank is

poised to explore innovative financing avenues, notably through Peer-to-Peer (P2P) lending

collaboration. Currently, 60% of MYbank's liabilities are reliant on interbank sources,

necessitating a strategic shift. Engaging in P2P lending aligns seamlessly with MYbank's mission

of financial inclusion and sustainability.

Rationale: Collaborating with established P2P lending platforms presents a compelling strategy.

MYbank can broaden its investor base by directly attracting funds from individual investors.

This diversification mitigates the risks associated with heavy interbank reliance and positions

MYbank to secure capital at potentially more competitive rates. As a technology-driven entity,

MYbank can synergize its innovative model with the flexibility and efficiency inherent in P2P

lending.

How Mybank Can Obtain Funds through P2P lending: Online banks can act as borrowers on

P2P platforms. If an online bank needs funds, it can apply for a loan through a P2P lending

platform, and individual investors on the platform may choose to fund the loan.

Advantage: Borrowing fund at a competitive rate.

Lower transaction costs compared to interbank transactions.

Reduced expenses associated with interbank fees, resulting in cost savings.

Quicker settlement times compared to interbank transfers .

Improve overall operational efficiency for MyBank.

Recommendations:
 11

In an era of dynamic financial landscapes, MyBank stands poised to strengthen its market

position and customer relationships. This set of recommendations aims to enhance MyBank's

offerings by providing personalized financial guidance, optimizing operational efficiency, and

aligning with evolving customer needs, fostering sustainable growth and ensuring a resilient

financial future for both the bank and its clients.

Market Share Expansion: a. Increased robust digital marketing strategies investment to attract a

larger customer base.

b.Expand the range of financial products and services to cater to diverse customer needs.

c.Explore strategic partnerships with businesses, fintech companies, or other financial

institutions to offer joint products and services.

Operational Cost Reduction: a. Explore artificial intelligence (AI) and robotic process

automation (RPA) for tasks such as data entry and routine transactions.

b. Adopt cloud computing to reduce infrastructure costs and enhance scalability.

c. Consider outsourcing non-core functions to specialized service providers.

Financial Guidance and Consumer Education: a. Initiate financial literacy programs to educate

customers about proper financial management, budgeting, and debt repayment.

b. Create a platform where customers can receive tailored recommendations on optimizing their

financial portfolios.

NPL Management: a. Regularly review and update risk management policies to stay ahead of

changing market, economic conditions and Government policies.

b. Develop early warning systems to detect signs of potential default.

c. Arranging emergency fund to meet up unexpected financial needs to keep the assets protected

to have a better NPL ratio below 1.

Customer Feedback Sharing: Establish multiple channels for customers to provide feedback,
 12

including surveys, online platforms, and customer service interactions.

Government Motto Alignment: a. Align MyBank's activities with government initiatives related

to social and economic development.

b. Actively participate in government-backed programs that promote financial inclusion,

economic growth, and sustainable development.

c. Collaborate with government agencies to implement initiatives that align with the bank's

mission and values.

Precautions against Money Laundering: a. Integrate AI based Anti money laundering Model to

analyze the Customer due diligence, monitor transactions in real time and report suspicious

transaction to avoid possible money laundering transaction attempt.

Conclusion:

To sum up, MYbank's strategic vision, commitment to innovation, and market positioning

underscore its potential for sustained growth. The emphasis on inclusive finance, advanced

technology integration, and ESG principles provides a competitive edge. To fortify its position,

MYbank should diversify funding through P2P lending, optimize operational efficiency, and

proactively manage NPL risks. Aligning with government initiatives, fostering customer-

centricity, and integrating AI-based anti-money laundering measures will enhance resilience in

the evolving financial landscape, ensuring MYbank's continued success.

 13

References

Yuan, X. (2010). Present and future of internet banking in China. Journal of Internet Banking
and Commerce, 15(1), 1.

Hua, G. (2008). An experimental investigation of online banking adoption in China.