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”.


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