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.

Advertisements

ChinaFintech – JD Adds E-lending Solution for Smaller Banks; Ant to Open up its Consumer Lending Products

On top of its own online lending system, JD Finance has developed Beidou Qixing (“The Big Dipper”) for smaller banks. Earlier this month the company launched a cloud services solution for small banks in conjunction with enterprise IT solution developer DCITS.

The Beidou Qixing suite includes solutions in credit assessment and underwriting, big data-based risk management and servicing, identity verification and anti-fraud authentication, and user acquisition and marketing. Partner banks can also use JD’s web-based asset securitization platform.

It has signed up some 30 banks. JD claims its credit risk assessment system, combining data generated from both JD’s e-commerce platform and the bank, can lower the average costs per customer by at least 70% and boost the efficiency of credit approval 1000%.

Beidou Qixing software suite is similar to that of Gamma, rolled out in November 2017 by OneConnect, the finance tech solution developer established by insurer giant Ping An. Gamma has also developed a full-fledged device for physical bank branches. OneConnect had signed up about ten banks at launch.

JD Finance claims Beidou Qixing can reduce the time needed to build a lending system from six months to one month. OneConnected said several months earlier that theirs had cut the time needed to six weeks.

Ant Financial, the fintech arm of Alibaba, will explore possibilities to open the two consumer lending products, Ant Credit Pay (purchase credit) and Ant Cash Now (cash loans), to banks and other third-party financial institutions.

Both JD Finance and OneConnect have also rolled out solutions for other business segments for conventional banking institutions, including mobile banking and robot investing.

JD Finance has reportedly started an RMB 13 billion (US$ 2 bn) round of funding led by China International Capital Corp. and COFCO at a valuation of RMB 165 billion to RMB 190 billion (US$ 26 – 30 bn). New funds raised will be used for obtaining licenses, R&D, and marketing, according to media reports.

China Fintech — JD Finance Turns First Quarterly Profit

JD Finance has turned its first quarterly profit, Richard Qiangdong Liu, founder and CEO of JD, said in an internal email in January. (Source in Chinese)

95% of work activities of its financial services operations have been automated. The company claims to have had 360 million users.

JD Shanfu, the NFC-based mobile payment service JD launched in July 2017, claims to has the biggest market share in NFC payments. JD Shanfu was the first third-party payment service to get integrated into QuickPass, the internet-based payment platform of China UnionPay which is the leading player in NFC-based payments. The mobile devices that support the China UnionPay’s NFC payment platform include iPhone, Apple Watch, Huawei phones and Xiaomi phones.

Baitiao (白条), the virtual revolving credit line available to JD shoppers, has begun turning profits. JD Finance’s big data-based credit assessment system has scored more than 300 million shoppers.

Baitiao Shanfu, a credit line for bank accounts that support the China UnionPay payment program, has been available with more than 19 million POS machines at over 8 million physical businesses across China.

The co-branded credit card program of Baitiao has launched 15 products in conjunction with several local commercial banks. The total applications have surpassed 10 million. JD Finance provides data and technologies to help banks improve decisioning process. These banks have seen approval rates increased by ten times and costs lowered by 70%, according to the JD founder. (Source in Chinese)