Chinese consumer lending firm Hexindai Inc. has filed for a US IPO to raise up to US$80 million.
Hexindai.com, targeting at the relatively well-off, extends medium-sized loans ranging from RMB20,000 to RMB140,000. 80% of the total transaction volume from March 2016 to June 2017 fell in this range.
Though positioned as an online lender, it’s been primarily dependent on the lending chain of Hexin Group, majority-owned by the founder and CEO of Hexindai Inc., for customer acquisition. Over 90% of the borrowers of Hexindai.com had been referred from the physical branches of Hexin Group as of June 2017 since its inception in March 2014, according to the filing. Hexin Group claims to have 144 branches in 103 Chinese cities as of June 2017.
Hexindai Inc. doesn’t pay any fees to Hexin Group for such referrals, but borrowers acquired by the latter pay both separately.
As of June 2017, it had had 110,156 investors and 56,230 borrowers on its platform.
Jianpu Technology, the directory and search service of online finance company Rong360, has filed a US IPO of up to US$200 million.
Jianpu operates an online platform where users can search for financial products, compare terms and conditions, and apply for loans or purchase personal investment products. Research results of loans or credit cards are not only based on the user’s needs but also his or her credit profile, according to its filing.
It also provides users a credit management tool and educational content. Jianpu claimed to have 63.6 million monthly active users in the first half of 2017, up from 34.8 million a year ago.
More than two thousand financial products providers, including both conventional financial institutions and the newly emerged digital finance companies, listed more than 100,000 products on Jianpu platform as of June 2017.
Apart from helping them acquire customers, Jianpu also offers third-party businesses custom data, big data-based risk management solutions, and other related services.
The company’s revenues are primarily generated from referral fees from loan products (on a cost-per-action basis) and credit cards (on a cost-per-success basis). Other revenue sources include display and performance-based marketing and risk management solutions.
The company hasn’t turned a profit yet. It recorded an operating loss of US$6.5 million on revenue of US$58 million in the first half of 2017.
Incorporated in 2011, the company launched the loan search service in 2012, credit card section in 2013, wealth management products section in 2014, big data risk management solutions in 2015 and Gold Cloud, the online transaction system, in 2016. Jianpu is a newly established subsidiary of Rong360 which also operates an online consumer lending platform. The credit offerings provided by Rong360 are also available on Jianpu. Jianpu will continue to be run under the “Rong360” brand.
Online lending platform PPDAI.com has filed for an IPO on the NYSE to raise up to US$350 million.
Founded in 2007, PPDAI.com was one of the first online lending platforms in China. As of June 2017, it had 48 million registered users, 6.9 million unique borrowers, and 202,000 investors.
Over 80% and 90% of loans were initiated through its mobile apps in 2016 and the first half of 2017, respectively. Its borrowers are primarily acquired online.
With its in-house developed credit risk assessment and investor-borrower matching algorithms, approximately 75% and 93% of the total number of loans got funded within 24 hours in 2016 and the first half of 2017, respectively. 77% of the total number of loans were funded within two hours in the first half of 2017.
The platform generated US$255.9 million in net revenues, with a net profit of US$154.7 million, in the first half of 2017. The total outstanding balance of loans increased from RMB607.4 million (US$89.6 million) at the end of 2014 to RMB20.6 billion (US$3 billion) as of June 2017.
It’ll be the fourth Chinese online lending platforms to get listed in the US if the IPO succeeds. After Yirendai’s IPO in late 2015, China Rapid Finance and Qudian launched theirs earlier this year.
Chinese online consumer lender Qudian has filed for an IPO on the NYSE.
Qudian provides merchandize credit products which allow consumers to take out installment loans for online purchases and small cash credit products. The merchandize credit products also receive sales commission fees apart from financing income.
Almost all of the transactions facilitated on Qudian are through mobile. Borrowers can apply for credit on Qudian mobile apps and partnering mobile services, and receive approval as soon as a few seconds, according to Qudian.
The company uses borrowers’ behavioral data generated on its own online platform, apart from data and credit analyses from third-party partners, to determine credit terms.
The strategic partnership with Ant Financial, the finance tech company affiliated to Alibaba, that allows Qudian products accessible through Alipay, the payment and financial services platform of Ant Financial, has significantly contributed to Qudian’s growth, according to the company. Zhima Credit, or Sesame Credit, the online credit scoring service developed by Ant Financial, provides Qudian with credit analysis information of prospective borrowers.
In the six months ended June 30, 2017, the company facilitated RMB38 billion (US$5.6 billion) in transactions to 7 million active borrowers, generating RMB1833 million (US$270 million) in total revenues and RMB1166 million (US$172 million) in operating profit.
Average monthly active users were 26 million as of June 2017. It registered 3 million new users in the first half of this year. The company was founded in April 2014.
Established in 2001, the company rolled out the online lending marketplace in 2010 and began facilitating short-term loans to consumers in the fourth quarter of 2014. Before the online platform, the company’s business was helping Chinese financial institutions, including Bank of China and China Construction Bank, create credit solutions, according to the company.
Since November 2014 the company has been using an automated system to assess and price credit risk of borrowers. Apart from traditional data points from the credit reporting platforms of Chinese central bank, credit bureaus, data vendors, the company also sources unstructured historical behavioral and transactional data of borrowers from online services including social networks, online travel agencies, e-commerce platforms and payment service providers.
The company’s target borrower base are Chinese EMMAs, or emerging middle-class mobile active users, many of who have quality employment records but no credit history or bank-issued credit cards. The principal uses of the loans range from shopping, entertainment, daily supplies and phone bills to business expansion and home improvement, according to China Rapid Finance.
The company’s products are thus available through its mobile app.
It’s current offerings are consumption loans and lifestyle loans, with the latter being larger, longer-term loans. Principal amounts generally in the range of RMB500 (US$72) to RMB100,000 (US$14,400). The maturities of loans facilitated by the platform range from one day to 36 months.
The platform charges borrowers transaction fees and investors service fees. Transaction and service fees net of customer acquisition incentives were US$60.3 million, US$58.9 million and US$58.8 million in 2014, 2015 and 2016, respectively. More than 85% was generated from fees for lifestyle loans while consumption loans accounted for 99% of the total loan volume.
It makes minor revenues from micro-credit loans extended through its subsidiary, Haidong.
The company incurred US$30 million and US$ 33 million in 2015 and 2016, respectively.
The company acquires borrowers through channels including social networks, online travel agencies, e-commerce platforms and payment service providers. With these online channels and the automated system, borrower acquisition costs were largely lowered that was US$20 and US$17 in 2015 and 2016, respectively, primarily consisting of cash incentives offered to investors, while the average customer acquisition cost for consumption loans was previously as high as US$770-800 per borrower with the direct sales through a salesforce and US$80-100 through other online channels.
The investors on the platform currently are mainly high net worth and family office investors.
The company claims it had facilitated more than 10.7 million loans to more than 1.4 million borrowers as of the end of 2016. New borrowers acquired in 2015 and 2016 were approximately 600,000 and 718,000, respectively. 67% of the total borrowers were repeat customers as of December 2016.
89% of all loan volume originated in 2016 consisted of prime and near-prime borrowers, whose creditworthiness the company believes is roughly comparable to FICO scores of between 660 and 720. The annualized average default rate has historically been 7 to 8% for lifestyle loans and 2% for consumption loans. The platform provides Safeguard Program, a risk reserve fund service, which compensates investors who have opted in in the event of default, and charges a fee for the management of the service. 质保专项款在14年至16年的计提比例为本金的12%,15%和18
A handful of other Chinese online marketplace lenders, or online peer-to-peer lending platforms, are also eyeing IPOs in the U.S. or Hong Kong in this year, that include Lufax, backed by Chinese insurance giant Ping An, PPdai.com and Dianrong.com, according to local media reports. Fenqile, which provides installment payment plans to consumers to its online retail site, is also reportedly planning an IPO. Yirendai that listed on the New York Stock Exchange in late 2015 is so far the only public company in online peer-to-peer lending.
There were 2236 peer-to-peer lending sites in China as of March 2017, according to peer-to-peer lending market research site P2P001, and a total of 2598 sites were gone, either being fraudulent sites or shut down by owners, over the past years. It is expected there’ll be further
Chinese authorities have issued a series of regulations for the online lending market and launched an investigation in April 2016. There were a number of high-profile frauds in the last couple of years. Yirendai reported a major organized fraud incident in 2016. China Rapid Finance claims they’re in full appliance with those regulations.
Red Packet transfers, however, are counted as payment transactions and account for the largest portion of the total transaction volume, followed respectively by payments to online businesses and at physical locations, according to Tencent management.
The breakdown among WeChat Payment, QQ Wallet and third-party mobile businesses who have added either/both of the two mobile payment services isn’t disclosed.
Payments and cloud services recorded RMB17 billion in revenue in 2016, so far the least profitable segment for Tencent that the combined cost of revenue is as high as RMB14 billion. The company believes their cloud service is the No. 1 in gaming and video segments in China.
Tencent’s 2016 revenues increased 41% from the previous year, mainly driven by revenue growth in smartphone games. Tencent recorded RMB70.8 billion in total gaming revenue for 2016, a 25% year-over-year growth. NetEase, its distant competitor in gaming, recorded RMB28 billion in gaming revenues last year.
Smartphone game revenues increased 80% year-over-year to RMB38.4 billion in 2016. ARPU of mobile game is RMB145-155 in the fourth quarter.
Honour of Kings, in-house developed mobile game and similar to Tencent’s own LoL in theme and design, surpassed 50 million daily active users as of the end of 2016.
Social networks revenues, generated from premium subscriptions, virtual items and paid digital content, increased by 54% year-over-year to RMB37 billion, mainly driven by sales of digital content and game-related items.
Tencent Video’s paying users surpassed 20 million in 2016. iQIYI and Youku-tudou, its direct competitors announced 20 million and 30 million paying users in June 2016 and December 2016, respectively. Tencent believes they are the No. 1 in terms of mobile video views.
Daily active users of Karaoke service WeSing reached 35 million as of the end of 2016, more than doubled year-on-year. It monetizes, like many other Chinese Karaoke services and live streaming services, through virtual gift sales.
Daily paying readers of its online literature publishing platform were around 2.5 million, more than doubled year-on-year.