ChinaFintech – All Major Chinese Apps Now Extending Consumer Credit

Toutiao, a leading mobile content platform, and Ofo, a mobile bike rental service, have recently added consumer loan offerings onto their apps. Now almost all major mobile apps in China have begun offering credit to their users, either financing purchases on their online retail platforms or at partner physical stores, or providing unsecured cash loans, or both.

Majors tout instant or near-instant approval decisions made possible through their automated or near-automated underwriting systems, either developed in-house or by third-party lenders or solution providers.

Many claim they apply machine learning, or AI, for credit risk modeling. Their data sources include their own online services and third-party alt-data vendors.

Alternative data is widely used by the local alternative lending industry as China doesn’t have a well-established consumer credit reporting market and the credit information database operated by the central bank serves mainly established financial institutions. Some major Chinese internet companies have data points considered having high predictive values for credit decisioning, such as payment histories, and online and offline purchases.

Thanks to the widely adopted alt-data-assisted credit decisioning, tens of millions of Chinese consumers with previously limited credit histories or limited access to credit now have a variety of credit options on the mobile apps they are using on a regular basis.

By pushing loan offerings to the pre-approved users, the borrower acquisition costs are significantly lower than through traditional offline channels.

While many internet companies partner with established financial institutions or online lenders, major internet companies like Ant Financial (Alibaba’s finance arm), JD and Tencent have been funding loans through their own financial subsidiaries or affiliates. ABS (asset-backed securities) backed by consumer loans became a major source of capital for some of them, particularly Ant Financial which was the biggest issuer of ABS in China in 2017.

A few tech giants have become major players in China’s consumer finance market. Ant Credit Pay, a revolving credit line available to qualified Alipay users, announced 100 million customers in mid-2017. Weilidai, the cash loan available on WeChat and Mobile QQ of Tencent, reached RMB100 billion (US$15 billion) in outstanding loans in 2017.

Given the ongoing regulatory tightening on internet-based consumer finance, some online consumer lenders with end-to-end capabilities plan to switch focus to become more of a lending technology solution provider. Ant Financial announced in May that the Ant Credit Pay would introduce third-party funding partners, banks and other financial institutions. JD Finance, the finance arm of JD, said in April this year that they planned to sell all loan receivables to financial institutions and then focus on providing technology platforms.


ChinaFintech – 2017 Results of Ant’s MyBank

MyBank (aka. Zhejiang E-commerce Bank), the online direct bank affiliated to Ant Financial, reports big jump in loan origination volume to RMB 446.8 billion in 2017, compared with RMB 87.9 billion originated during the period between mid-2015 and the end of 2016.

The outstanding balance increased to RMB 96.3 billion at the end of 2017, up from RMB 32.9 billion one year ago. The average loan balance per borrower was RMB 28,000 in 2017, up from RMB 15,000 one year ago.

The total number of business borrowers, the target market of MyBank, had reached 5.7 million as of the end of 2017, up from 2.77 million one year ago.

Duoshou Duodai (多收多贷), a loan product for micro-businesses who use Alipay QR code payment service to accept payments, signed up 1 million customers between June and December 2017. The number would increase to 3 million by June 2018.

The total revenue and net profit increased by 52% and 28%, respectively.

Source: MyBank

In 2017, RMB 26.5 billion worth of loans, or 6% of the total, was made to borrowers located in rural areas. The outstanding balance of rural loans was RMB 3.9 billion, or 11.9% of the total, as of the end of 2017. Rural borrowers reached 750,000, or 1.3% of the total, in 2017.

Delinquency rate was 1.23%. The company has developed a series of big data-based borrower credit assessment and other risk management systems.

The average APR decreased by 1% in 2017. Capital adequacy ratio was 13.5%.

Yulibao (余利宝), a money market fund that allows business customers to buy into with their account balances, had had 6.75 million customers as of the end of 2017. The fund is managed by Tianhong Asset Management Co. Ltd, a mutual fund company majority-owned by Alibaba and the manager of Yu’e Bao (余额宝).

Ant Financial, the digital finance arm of Alibaba, is the biggest shareholder in MyBank that holds a 30% stake in it. Incepted in June 2015, MyBank is one of the three online-only banks in China — The other two are WeBank, an affiliate of internet giant Tencent, and XWBank (新网银行), backed by smart device maker Xiaomi.

While MyBank is focused on serving small businesses especially the merchants of the e-commerce and financial services of Alibaba and Ant Financial, WeBank mainly targets consumers on WeChat and QQ, Tencent’s massively popular messaging apps. Ant Financial’s consumer lending business is operated through two separate small loan companies.

Source: MyBank, WeBank (Click to enlarge)

ChinaFintech – Alibaba’s Business Credit Arm Totals 10M Borrowers

A cumulative total of 10 million businesses on Alibaba and its affiliated platforms took out loans from its business credit arm in the last five years, the company unveiled it at an event earlier this month. Since 2015 the business has been operated by MyBank (网商银行), the online direct bank in which Ant Financial (Alibaba’s finance arm) has a 30% stake.

Duoshou Duodai (多收多贷), a loan product for small and micro-businesses who use the Alipay QR code payment service to accept payments, has signed up 3 million customers since its launch a year ago this month.

MyBank said they’ve decreased the average loan origination cost to RMB 2.3 (US$0.35), with RMB 2 billed for technology, from some RMB 2000, mainly manual labor cost, with traditional lenders.

MyBank announced to open its near-instant lending technology and other tech capabilities to third-party financial institutions. It aims to sign up some 10 million financial institutions and some 30 million small and micro-business customers in the next three years.

ChinaFintech – Ant Fortune Opens up AI Capabilities to AMCs

Ant Fortune, Ant’s online platform for investment products and services, announces to open a full suite of AI capabilities to asset management firms.

When launching Caifuhao platform in June 2017, Ant Fortune began to offer third-party mutual fund sellers some AI tools to improve performance such as the matching of customer needs and offerings.

Ant also provides third-party financial institutions a customer service bot, called Machine Intelligence Service Assistant (MISA).

Ant Fortune claims that these AI offerings have proven to be able to increase the operational efficiency of Caifuhao accounts by 70% and lower costs by 50%.

Ant Fortune platform has had some 27 mutual fund companies that have listed about 4000 publicly traded funds.

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.


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.)

Online Consumer Lender Qudian Files for US IPO

Source: Qudian (Click to enlarge)

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.