China Fintech – Ant Financial: All Major Business Lines are Profitable

All three major business lines of Ant Financial, including consumer credit, SME loans, and personal investment products, are profitable, said Alibaba management on the latest earnings call.

Ant Financial shared a total of more than RMB4.9 billion to Alibaba in 2017. According to the profit sharing system where Ant Financial shares 37.5% of pre-tax profits to Alibaba, the total pre-tax profits Ant Financial earned in 2017 is more than RMB13 billion.

Alibaba is taking a 33% equity stake in Ant Financial that will terminate profit sharing.

Alipay

Daily active users of Alipay more than doubled year-on-year in the fourth quarter of 2017The total number of users was 520 million in 2017, up from 450 million a year ago. (link in Chinese)

Mobile payment transactions as a percentage of the total increased to 82%, compared with 65% and 71% in 2015 and 2016, respectively, according to Alipay 2017 annual report. (link in Chinese) The ratio was higher than 90% in 11 provincial regions (out of a total of 30+), most in less-developed areas. In the previous year, only Tibet saw the ratio higher than 90%.

Alipay transactions from outside of mainland China increased 306% year-over-year. The payment service has been adopted by merchants in 36 foreign countries and overseas regions.

Souqianma (收钱码), the QR code payment service for small-and-micro businesses launched in February 2017, had signed up over 40 million customers as of the end of 2017.

More than 40 million Alipay users ever made payments for hotel stays or rental services through the deposit exemption program provided by Zhima Credit, the credit scoring service of Ant Financial. The program had had about 2600 merchants offering more than 20 categories of rental and leasing services as of December 2017, according to Li Congshan, vice president of Zhima Credit. (link in Chinese)

Public transport services, buses, subways or boats, in more than 30 Chinese cities have begun accepting Alipay. More than 200 million users ever used the City Service, which provides more than 100 services in healthcare, public and private transport, and public sector.

Consumer Credit

Users of Ant Credit Pay (花呗, formerly Ant Check Later), a revolving line of credit available to Alipay users, spent RMB700 per month on average as of November 2017. The average personal loan of Ant Cash Now (借呗), a personal cash loan product, was for about RMB3000, with ARPs of 14.6% on average. Both saw the delinquency rate below 1% in the last three years since their launch, according to Ant Financial. (link in Chinese)

86% of the Ant Credit Pay users were Post-80s and Post-90s, people born between 1980 and 1999, as of November 2017. The credit limits for these young users were between RMB1000 to RMB1600 and the average monthly spending was RMB349, generally spent on online shopping, mobile top-up, purchases at convenience stores or restaurants, and bike rentals. (link in Chinese)

The total ABS issuance of the two small loan companies behind the two consumer loan products in 2017 were RMB159.5 billion and RMB132.6 billion, respectively, up from RMB47.8 billion and RMB16.5 billion in 2016, respectively. (via China Securitization Analytics)

Ant Financial announced in December 2017 to increase the total registered capital of the two companies to RMB12 billion, up from RMB3.8 billion. (In China a company’s borrowing quota is pegged to the amount of the registered capital.)

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China Fintech – Financials of Ant Financial’s Consumer Credit Products

Some financial numbers of the operators of the two major consumer loan products provided by Ant Financial have recently been disclosed or seen by local media outlets.

Chongqing Mayi Shangcheng Small Loans Co., Ltd. (重庆市蚂蚁商诚小额贷款有限公司), formerly Chongqing Alibaba Small Loan Co., Ltd., operates Ant Cash Now (借呗), a short-term unsecured loan product available for Alipay users launched in April 2015.

The average daily interest rate Ant Cash Now charges is .04%, or an APR of 15%.

Apart from their own capital, securitization is the major funding source for the company. The cost of capital through securitization is estimated to be around 6%.(Source: First Consumer Finance)

Chongqing Mayi Micro Loans Co., Ltd. (重庆市蚂蚁小微小额贷款有限公司), which operates Ant Credit Pay(花呗), formerly Ant Check Later, made RMB1.49 billion in revenue and RMB1.02 billion in net profit in the first half of 2017, according toFirst Consumer Finance.

Ant Credit Pay (花呗), launched in December 2014, offers a revolving line of credit to Alipay users for purchases with online and offline businesses. It also offers installment loans for consumers to pay down revolving debt and allows businesses to provide installment credit for purchases.

(Source: First Consumer Finance)

The balance of the revolving credit and installment loans for paying down revolving debt was RMB89.3 billion as of June 2017, with NPL ratio and delinquency rate being 1.29% and 1.83%, respectively.

The balance of the installment credit for purchases was RMB9.9 billion as of June, with delinquency rate being 0.01%.


JD Finance and the Industrial and Commercial Bank of China (ICBC), jointly launched a digital bank, Gongyin Xiaobai, which will target young customers. (ICBC announcement in CN)

The two also plan to work together to build new retail stores including unmanned precious metals stores.


Speaking of ICBC, it claims its mobile banking service, ICBC Mobile Banking had had 300 million registered users as of October, with more than 40 million being monthly active and 100 million annually active. (ICBC announcement)


The total monthly active users of banking apps were 171 million in October, a 17% year-over-year increase, according to the QuestMobile, a local mobile market monitoring and research firm. 69% of the total users are under 30 years old.

The top five in terms of monthly active users were apps of China Construction Bank (38mn), ICBC (36mn), Agricultural Bank of China(24mn), CMB Life, the banking service for credit card users of China Merchants Bank (23.5mn), and China Merchants Bank (19mn). (QuestMobile report in CN)