China's first online bank, called WeBank, has granted its first loan on Sunday to a truck driver from Shenzhen named Xu Jun after getting approval to open along with five others.
The bank transferred 35,000 yuan (around $5,600) to Xu. The annual rate of interest for the loan is 7.5 percent; the agreement states that Xu will repay the principal and interest in six months.
The 7.5-percent interest rate is garnered from the analysis of the driver's information, which included Xu's gender, age, education, marital status and social network.
"Internet-based banking is a significant step in China's financial reform," Premier Li Keqiang mentioned during his visit at WeBank. He also emphasized that the Chinese government will support the development of private and online banks.
"The bank will focus on financial services including deposit and loan services to individual consumers as well as micro-sized and small enterprises, rather than chasing big companies and people with high assets," Gu Min, the bank's chairman, stated.
"We aim to cover 30 million small businesses and 300 million individual consumers in the upcoming decade," he added.
The bank employs about 450 staff members, 60 percent of which are on the technical aspect of the operations. The bank is purely Internet-based and will have no physical branches, which reduces the cost of operations by 10 percent of the industrial average.
Businesses that use technology have the potential benefits of agility and strong technical abilities and can compete with traditional financial institutions by building fast financial capabilities, as said by Jonathan Woetzel, a researcher from McKinsey Global Institute in Shanghai. He also stated that the opening of the financial institute will help raise China's GDP by 1 to 2 percent, which can open 11 million jobs.
Premier Li has high hopes on the online competition in banking which is expected to cut costs and force large government-operated financial institutions to update old business models, according to the same report.
WeBank is China's first bank that purely operates online.