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.

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ChinaFintech – Ride-hailing Network DiDi Now Offering Full-fledged Financial Services

Screenshot of DiDi Financial Service Page

DiDi, the leading mobile ride-hailing service, has tapped into online consumer lending, auto leasing and sales financing, personal investing and digital payments.

Most of the current lending offerings are funded and administered by banks and other financial institutions. DiDi provides data and analytics capabilities to partner third-parties.

The six-year-old service claims to have accumulated more than 550 million riders and 21 million registered drivers.

Personal Loans

DiDi recently dark launched a new payment option that offers riders a 500 yuan (US$75) open-end credit line. It is funded by a local small loan company. (link in Chinese)

Earlier in April, DiDi app added Dishui Dai (滴水贷), which provides unsecured personal loans up to RMB200,000 (US$30,000). Funded and administered by XWBank, the online direct bank minority-owned by smart device maker Xiaomi, the loan was designed to be available to some 100,000 select accounts on DiDi for the initial launch. (link in Chinese)

After making an investment in DiDi in early 2016, China Merchants Bank began to provide car installment loans to DiDi drivers. All DiDi drivers could apply and credit decisions would be based not only on the credit history of the driver but also the data provided by DiDi. China Merchants Bank claimed they’d be the only bank to finance new car purchases by Didi drivers. (link in Chinese)

In August 2017 DiDi registered a loan company, Chongqing Xi’an Micro-credit Co., Ltd.(重庆西岸小额贷款有限公司) (not official translation).

Auto Leasing and Sales Financing

DiDi established a financial leasing company, Zhongfu Financial Leasing (Shanghai) Ltd. (众富融资租赁上海有限公司), in March 2016. It now provides financing options to car buyers and auto leasing and sales companies on the subsite for car listings within DiDi apps.

In 2016 DiDi added Di Fenqi (滴分期), a car installment loan available to all app users, that finances car purchases through dealers and car leasing companies on its platform. (link in Chinese)

In March 2018 DiDi registered an issue of RMB 100 billion (US$ 15 billion) ABS backed by auto leases to finance new car purchases by car leasing companies on its car listing subsite.

Money Market Fund

DiDi Jinjubao (金桔宝), launched in March 2017, allows users and drivers to buy into a money market fund with their account balances. The fund is managed by a domestic mutual fund company.

Insurance

By working with third-party insurers, Didi offers auto, travel, and health insurance plans to both drivers and users, and some creative offerings such as a “traffic jam” insurance.

Payment

Didi fully acquired digital payment company Gaoyang Jiexun (19Pay) in December 2017.

In 2016 DiDi and China Merchants Bank issued co-branded debit and credit cards.

China Fintech — Didi Begins Extending Credit to Drivers; First Consumer Credit Reporting License Granted

Didi, the leading ride-hailing service, has begun making short-term loans up to RMB19,000 (US$ 3000) to drivers on its platform.

Didi runs simple credit screenings and recommends creditworthy accounts to third-party lenders, including banks and consumer finance companies. (Source in Chinese)

The company has previously rolled out a variety of financial products and services to drivers, including a car finance product (Yidi Fenqi), a money market fund (Didi Jinjubao), and auto insurance.

Didi registered a loan company in August 2017 and fully acquired digital payment company Gaoyang Jiexun (19Pay) later in December.


China’s central bank, or PBoC, has granted its first license for personal credit reporting to Baihang Zhengxin Limited (百行征信有限公司), according to the PBoC announcement.

The National Internet Finance Association of China (NIFA), a state-backed trade group, holds a 36% stake in it and the eight companies greenlighted by the PBoC to develop their own consumer credit reporting systems in 2015 each holds an 8% stake.

Four of the eight companies are owned by or affiliated with major tech companies. They are Zhima Credit Management Ltd. (芝麻信用管理有限公司) of Ant Financial, Tencent Credit Ltd. (腾讯征信有限公司), Qian Hai Zheng Xin (深圳前海征信中心股份有限公司) and Kaola Zhengxin (考拉征信有限公司), formerly with Lakala. Each of them launched their own big data-based credit scoring system in the last couple of years and are offering consumer credit to their users through their mobile apps and websites.

Baihang Zhengxin is registered in Shenzhen. Zhu Huanqi, the chairman and president of the company, is the chairman of the state-owned Huida Asset Management and formerly a mid-level official at the central bank.