Shenzhen fintech titan Vzoom mines tax data to boost credit for small businesses

Vzoom Credit, a Shenzhen-based financial technology or fintech provider, will deploy more resources to link tax data of small and micro businesses to banks and financial institutions, so that the former can receive timely credit.

Vzoom is pinning its hopes on government support for expanding tax relief policies and guiding local governments to improve their financing for small and micro businesses.

According to the annual work plan of the National Development and Reform Commission, the government will develop regulatory systems specifically for innovation-related companies this year.

This will likely spawn fintech opportunities for companies such as Vzoom. For, many small companies find it hard to obtain loans for their business due to poor credit data. Without adequate information like past credit record, banks and financial institutions typically avoid extending loans to small businesses.

Vzoom will seek to fill this gap by providing authentic tax information in real time by harnessing big data and artificial intelligence technologies.

It will source data from tax bureaus and present it to banks in a way that enables accurate evaluation of loan applicants' credit status.

"Unlike other data that the small companies can easily fudge, authentic tax data says a lot about companies," said Geng Xinwei, CEO of Vzoom. "The monthly tax payments show if the company makes profits, the tax record reflects credibility, indicates the equity structure and registration status, whether or not it is a legal entity. And more importantly, it is a financial statement."

He said financial statements that small companies submit to banks usually exaggerate their profitability. However, the one submitted to the tax bureau is the one mostly likely to reflect the truth.

"It's hard for traditional banks to analyze the credit status of small businesses due to the lack of data and questionable financial reports submitted by the companies," he said. "For small businesses, the single sum of loan is usually relatively small but comes with higher risk, so the banks are less willing to issue mortgages to them."

He said traditional time-consuming mortgage system, one loan would require a lot of human resources to evaluate the asset and analyze the submitted financial reports.

"How to finance micro and small businesses is a global issue, not just a Chinese problem," said Geng. "We need to figure out which data to use and how to use them in credit evaluation."

Zheng Wanchun, president of Minsheng Bank, said apart from credit evaluation, there are other obstacles in the way of small business getting loans.

"There are very limited financial products for micro and small businesses, and the service costs are relatively higher," said Zheng. "There is higher risk in lending money to those companies. Therefore, the interest on the loan will be higher than average."

He said fintech solutions were much efficient and accurate, especially in risk control based on data from tax bureaus. "In the traditional way, it takes one or two weeks for application processing before the company can get loans from the bank," said Geng. "But with big data and modeling systems, we can shorten the time to just a few seconds."

By the end of July 2017, Vzoom's data service was provided to over 80 banks in 28 cities. More than a million micro and small businesses received 100 billion yuan ($15.78 billion) in all in loans.

Geng said the fintech company is still in talks with more banks to expand its business to benefit more such micro and small businesses.

Such businesses are an important part of the economy, he said. According to the China Association of Small and Medium Enterprises, which is based in Beijing, by last July, China had 73 million micro and small businesses. And their number is growing.

With the country tightening the regulation on the emerging fintech sector, Geng said fintech startups should comply with the laws and regulations concerned.

"We make sure we are authorized by the clients before we link their tax data to financial institutions. It's our first priority."