HKMA to waive proof of income and address for online, mobile loans
Under a new guideline, banks can now collect other big data or information to fully access the credit risk of internet and phone applications
Hong Kong Monetary Authority (HKMA) is to allow banks in the city to offer a share of their personal loans to online or mobile phone applicants, without them having to provide proof of income or address – its latest move to encourage local lenders to embrace financial technology, according to a circular issued on Wednesday.
Until now, all personal loan assessment has required applicants to prove their income and address, a strict policy the HKMA claims was in place to “present a barrier to the adoption of new credit risk management enabled by innovative technology, such as data analytics”.
Under the new guideline, banks can now collect other big data or information to fully access the credit risk of internet and phone applications.
It said the loan sizes allowed will be smaller than for conventional credit, although the HKMA did not say by how much smaller that will be, only indicating it was still negotiating with individual banks, based on their current lending levels.
It did say, however, that those banks which adopt the new credit approach must not lend more than 10 per cent of their capital base, or if a bank is incorporated outside Hong Kong, the loan size must not more than 10 per cent of its personal loans portfolio initially.
“The HKMA has completed a study, together with authorised institutions and tech firms with regards to online finance,” the circular said.
But Raymond Chan, executive director (banking supervision), admitted that from the study’s finding, the HKMA has concluded some existing supervisory requirements – including income and address proof – will remain firmly in place for some institutions, making it difficult for them to make a smooth transition into the online lending era.
The new guideline comes after a series of recommendations made by a task force called “Banking Made Easy”, on how the Hong Kong financial industry can make the shift into the digital age.
The task force was set up after the HKMA last September and announced seven core initiatives to promote “smarter banking” in the city.
The new arrangements will initially be on personal lending, but Chan added the HKMA is likely to follow a similar approach for bank lending to small business, such as start-ups. Mortgage lending will not be allowed to use the new approach, however.
Bank of China Hong Kong (BOCHK), one of the city’s largest local lenders, said it welcomed the new HKMA guideline.
“We will follow the guideline, to improve approval procedures of online personal loan applications,” said Ann Kung Yeung Yun-chi, its deputy chief executive.
“This will cut down on the demand for documents, shorten application times, and enhance our customer service offerings.”