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)


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.)

Xiaomi’s Smart Wearable Affiliate Huami Files for US IPO

Huami Corp., the supplier of Xiaomi smart wearables, has filed for an IPO in the U.S. Xiaomi and Shunwei, the venture capital firm co-founded by Xiaomi founder Lei Jun, currently hold 19.3% and 20.4% of the total outstanding shares of Huami, respectively.

The sales of Xiaomi-branded wearable products contributed 97.1%, 92.1% and 82.4% of Huami’s total revenues in 2015 and 2016 and the first nine months of 2017, respectively. Huami depends on Xiaomi’s online and offline channels to sell both Xiaomi-branded and its self-branded products.

Source: Huami Corp.

Mi Band, a low-cost activity tracker launched in July 2014, is Huami’s signature product. Out of the total 45.3 million wearable devices Huami had shipped as of September 2017, 40 million were Mi Bands.

Activity tracking bands, including Mi Bands and those under Huami’s own brand, were the main revenue generator that contributed 81.7%, 85.8% and 73.2% of the total revenues in 2015, 2016 and the first nine months of 2017, respectively.

Xiaomi Mi Band (Image: Xiaomi)

Other products Huami makes include smartwatches, smart body scales, and accessories.

The total shipments in 2015, 2016 and the first nine months of 2017 were 14.4 million, 17.8 million and 11.6 million, respectively.

Image: Amazfit

Its own brand, Amazfit, is positioned as a premium brand as compared to Xiaomi’s Mi brand and has had a higher gross margin than that of Xiaomi-branded products since 2016. In the first nine months of 2017 Amazfit products accounted for only 4% of the total shipments but generated 17.6% of the total revenue for the company.

The accompanying mobile apps of all the hardware products claimed 49.6 million registered users as of September 2017. Huami hardware and software products collect over 10 dimensions of measurement, including heart rate, ECG, weight, body fat compositions, GPS running track, steps and sleeping duration.

The company doesn’t maintain its own manufacturing facilities but relies on a number of contract manufacturers.

China Fintech – Financials of JD Finance and Baidu Finance

JD Finance

The finance arm of JD, the second largest e-commerce company in China, reportedly recorded a net loss of RMB568 million in 2016. JD Finance offers a wide range of financial products and services to the individual and business customers of JD.

Baitiao (白条), a virtual line of credit available to all JD shoppers, had signed up 11.5 million users as of June23rd, 2017, with RMB25.7 billion in accounts receivable.

Launched in February 2014, Baitiao supports purchases on the online retail platform and with partnering businesses of JD, and provides cash advances to a portion of JD shoppers.

Baitiao’s portfolio consists primarily of small-balance loans, with accounts carrying a balance of less than 3000 yuan accounting for 97% of the total transactions and 72% of the total receivables as of June 2017. The average 90-day+ delinquency rate in the first six months of 2017 was 2.44%.

Consumer electronics and appliances, and clothing accounted for a combined over 70% of the total volume of Baitiao payment transactions as of February 2017.

JD Finance uses its own big data-based credit scoring and underwriting system. ZestFinance, a US-based underwriting tech developer, helped revamp JD’s underwriting system after JD invested in it in 2015. JD’s system had scored about 200 million users as of June 2016.

JD and JD Finance had issued a total of RMB41.2 billion ABS as of December 5th, 2017.

( Source: Chinese report by First Consumer Finance)


 (Source in CN)

Baidu’s online consumer loan business is operated by two companies, Chongqing Baidu Small Loans Co., Ltd.(not official translation), established in October 2015, and Shanghai Baidu Small Loans Co., Ltd.(not official translation), with the bulk of the total loan volume originated by the former.

Chongqing Baidu Small Loans recorded RMB44.6 million in net loss on revenues of RMB401 million in the first half of 2017. The loss was mainly due to the loan loss provision, 2.5% of the total outstanding loan receivables, the company set aside and R&D costs in software system development, according to the company.

The sources of funding for Baidu’s online lending businesses include RPs, bank borrowing and corporate ABS.

(Source: Report in Chinese)

ABN (asset-backed notes)

Chinese authorities have reportedly suspended approving issuances of consumer loan-backed ABS (asset-backed securities) as part of the recent crackdown on online consumer lending. (Caixin report in CN) Major players now turn to ABN to raise funds. ABN allows non-financial enterprises to raise funds in China’s interbank market.

In November, the company behind Ant Cash Now, the online personal loan product provided by Alibaba’s finance affiliate, and one of Baidu’s personal loan companies registered to issue RMB30 billion and RMB4 billion worth of ABN, respectively, according to their registration statements with the National Association of Financial Market Institutional Investors, the supervisory body of ABN.

But Alibaba’s Ant Cash Now has recently withdrawn the registration. It is speculated that it’s due to the pressure from authorities. (Source in CN)

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)

China Fintech Newsletter – Nov. 20-26

American Express and Zhejiang Junbao Communication Technology Co., Ltd., aka. Lianlian Shuzi Keji, have established a 50/50 joint venture, Liantong (Hangzhou) Technology Service Co., Ltd. A wholly-owned subsidiary of Zhejiang Junbao operates online/mobile payment service Lianlian Pay.

Both American Express and VISA submitted an application for a payment clearing and settlement license in China in July. (Source in CN) But China still wants foreign payment card companies to form local joint ventures for onshore operations, according to Reuters.

The executive board of the National Internet Finance Association of China (NIFA) has approved the plan to establish a personal credit reporting agency together with the eight consumer credit reporting system developers, including Ant Financial’s Zhima Credit and Tencent Credit, picked by the central bank for a pilot program in 2015. (Sina report in CN)

The long-rumored agency has been called Xinlian. Earlier media reports said that each of the eight would take an 8% stake in Xinlian.

Digital POS terminal maker Shenzhen Xinguodu Technology (SZ:300130) or NEXGO, has acquired Jialian Pay, which provides payment tools to small businesses, for RMB710 million (US$108 million). Jialian Pay obtained a payment license in June 2017.

edaili announced an undisclosed amount in Series B round of funding led by Matrix Partners China and joined by existing investors including K2VC, Lightspeed China Partners, Sky9 Capital and Lippo Group.

edaili operates an online platform that connects affluent Chinese investors with overseas investment options and wealth managers.

Chenxin Credit Information, a commercial credit reporting service provider, has secured Series A funding. The company provides big data-based solutions to local governments, including financial regulatory authorities, and commercial banks, and data to other credit reporting agencies. (Source in CN)

Local authorities responsible for licensing small/micro loan companies were ordered to suspend granting new licenses for online operations and permits for regional expansions on November 21st. (Policy document in CN) New regulation changes will reportedly be released in the coming week but won’t be “disruptive”. (Yicai report in CN)

More than 200 licenses for online small loan operations have been issued. According to data collected by WDZJ, a local media outlet focused on online lending, some 98 (46%) have been granted in 2017 and 59 (28%) issued in 2016. (Report in CN)

Apart from major online finance players, various types of tech companies have obtained such a license, ranging from online shipping sites (VIPshop), online travel sites (Ctrip, Qunar and Tuniu), local business listing platforms (Meituan &, to entertainment streaming platforms (YY). Some companies hold more than one; for instance, Ping An, the parent of Lufax, and JD Finance have each obtained four, Ant Financial holds three, and Qudian holds two.

There were some 8610 small loan companies with a total loan balance of RMB970 billion as of September 2017, according to China’s central bank. “Small/micro loan company“, born in 2008, was the brainchild of Chinese banking authorities to increase access to credit in rural and less-developed areas. Apart from capital from their own shareholders, small loan companies are allowed to raise external funds of no more than 50% of their net capital from no more than two banking institutions. The loan balance of any single borrower mustn’t exceed 5% of a company’s net capital.

Now some 17 local financial authorities, many in economically developed regions, are authorized to issue the licenses and their standards vary from place to place.

The online small-loan company license applies to small loan companies who extend credit through online channels. Zhejiang Ali Small Loan Company (now part of MyBank), established by Alibaba in 2010, was one of the first, if not the first to make loans to online borrowers– merchants on Alibaba’s online marketplaces. While theoretically small loan companies were only allowed to operate in the region where they were registered, the Alibaba’s small loan company was able to make loans to borrowers no matter where they were located. Inspired local authorities then began to grant online small-loan licenses and allow regional expansions. (Source in CN)

The order was issued by the work team established to implement the measures for reining in risks in Internet finance the State Council released in October 2016. (Document in CN)

Ant Financial has launched an investigation into the interest rates and other fees charged by third-party consumer lenders on Alipay Lifestyle Account platform, where businesses can provide services or push promotional content to subscribers, and will remove those that still charge an annual rate higher than 24% by November 30th. (Source in CN) 24% is the maximum annual interest rate on loans the courts would enforce collection, though rates of up to 36% are legal.

Zhima Credit, the credit reporting service of Ant Financial, suspended cooperation with some lending platforms on November 21st due to “problems founded during the inspection such as additional charges besides legal interest, inappropriate collection methods and violations of the agreements”.

China Fintech Newsletter – Nov. 13-19

Tencent reported 280% year-on-year growth in monthly offline payment volume in the third quarter. The social and gaming giant provides payment services through WeChat and Mobile QQ, the most popular messaging apps in China.

aiBank (aka. Baixin Bank), the direct bank co-established by search giant Baidu and China CITIC Bank, opened for business. Their initial offerings include consumer credit, small business loans and wealth management products. Baidu has a 30% stake in it. (Source in CN)

Speaking of Baidu, it launched a series of technology solutions for financial services and financial products at its annual conference:

  • A big data-based risk management solution, a web-based securitization platform called Panruo, and a consumer financing solution.  (Source in CN)
  • AB Dai, a loan product using the credit scoring system developed by Baidu and co-launched with Agricultural Bank of China. (Source in CN)
  • An RMB30 billion (US$4.5 billion) ABS fund co-established with Shanghai Pudong Development Bank. (Source in CN)

PBoC, China’s central bank, plans to fully open up China’s digital payment sector, said Fan Yifei, vice governor of the PBoC, on 2017 China Payment and Clearing Forum on 16th. (via Xinhua)

LexinFintech files for an IPO of US$500 million on the NASDAQ

Industrial and Commercial Bank of China, China’s biggest bank and one of the largest banks worldwide, launches AI Tou, a robo-advisor. (Announcement in CN)

Facial recognition tech developer SenseTime announced a strategic investment from Qualcomm Incorporated. Earlier in July, it announced US$410 million Series B round of funding. (Source in CN)

SenseTime’s personal remote authentication (face verification, OCR recognition of ID card and bank card) and paper receipt recognition solutions are used by a range of financial services apps and terminals including JD’s mobile wallet app and China Merchants Bank.

Digital financial services provider 9F Group (“Jiufu”) announced “hundreds of millions of dollars” new funding from China Cinda (HK) Holdings Company, Jason Jiang (founder of Focus Media), Lin Qi (founder of Youzu Interactive), and a local industrial fund. (Announcement in CN)

The company’s businesses range from online investment products sales, peer-to-peer lending, robo investing to big data-based personal credit scoring. Founded in 2006, 9F claims to have more than 46 million cumulative users and over 90% of the users access its services through mobile. (Source in CN)

Yirendai reports Q317 results. The total loan originations grew 117% year-over-year.

76% of the total borrowers (193,000) were acquired from online, and 57.2% of the total loan volume was transacted from online channels. Nearly 100% of the online loan volume was facilitated through the mobile end.

All the investors invested through the company’s online channels, and 93% of them used Yiren Wealth, the mobile app for investors to invest in peer-to-peer loans, or purchase mutual funds or insurance. The mobile app had 481,000 monthly active users in September, a 20% year-over-year growth.  (Earnings call transcript)

Some takeaways related to Alipay from Qudian Q317 earnings call.

  • Almost 50% of the new borrowing engagement was from Alipay.
  • Qudian had paid Alipay on a cost-per-click basis from April when its retail installment service was added onto Alipay app to September and began to pay on a cost-per-sale basis from October 1st.
  • In the third quarter, for the first time, all of the payment transactions were processed through Alipay.