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)

LexinFintech Files for US IPO

LexinFintech has filed for an IPO on the NASDAQ, planning to raise US$500 million.

The company operates Fenqile, an online retail installment seller (a major competitor of Qudian), Juzi Licai, an online investment platform, and Dingsheng Zichan, which matches customer loans with investors including individual investors on Juzi Licai and institutional investors, such as peer-to-peer lending platforms, commercial banks and other financial institutions. Its funding sources include its own direct lending programs and asset-backed securities (ABS), according to the company.

The company’s targeted customers are educated young adults. It claims over 6.5 million customers with an approved credit line and over 20 million registered users as of September 2017. Active customers were 3 million in 2016 and 3.3 million in the nine months ended September 2017.

It acquires customers online through social referral and cash rewards campaigns and offline by issuing co-branded credit cards with commercial banks. The acquisition cost per customer was 114 yuan, 127 yuan (US$19) and 105 yuan (US$16) in 2015, 2016 and the first nine months of 2017, respectively.

Hawkeye is the company’s in-house developed automated credit assessment and underwriting system that utilizes 5,000 potential data variables and it has developed more than 1,000 decisioning rules. 95% of all loan applications can be assessed and approved automatically within seconds on average, according to the company.

The company’s revenues are from item sales and installment loans. Its financial services income more than doubled year-over-year in the first nine months this year, though the direct sales revenue decreased. It managed to turn a profit in the first nine months of this year.

Source: LexinFintech

Online Marketing Firm iClick Files for US IPO

image credit: iClick

iClick Interactive Asia Group, China-based online marketing solutions and services provider, has filed plans for IPO.

The company provides marketers with a self-service system and managed services through an account management team. It claims its consumer data-based marketing solutions “analyzed approximately 665.4 million active profiled users with 19 attributes on average for each such profile” in the 30 days leading up to August 31, 2017.

Data are collected from channels including its own proprietary tracking tools, marketers, publishers, ad exchanges, and other third-party partners. “These user profiles, which are updated and refined on a continuous basis, typically include information on a user’s attributes, such as his or her demographics, geographic location, device preference, spending history, personal interest and other online or offline behavioral pattern”, according to its filing.

iClick covered approximately 74,000 mobile apps and 2.3 million websites in the 30 days leading up to August 31, 2017.

Gross billing from mobile audience solutions represented 23.2%, 47.6% and 60.9% of its total gross billing in 2015, 2016 and the six months of 2017, respectively.

The gross billing from direct marketer clients as a percentage was over 70% and 60% of the total in the two years prior to 2017 and in the six months of 2017, respectively, with the rest from marketing agency clients.

Its revenues are primarily from clients’ marketing spend with their marketing services and a minority from incentives from the publisher under its sales agency arrangement. The company generated US$65 million, US$95 million and US$55.7 million in net revenues, with a net loss of US$39.7 million, US$27 million and US$22 million, in 2015, 2016 and the first half of 2017, respectively.

Chinese Consumer Lender Hexindai Files Plans for US IPO

Chinese consumer lending firm Hexindai Inc. has filed for a US IPO to raise up to US$80 million., targeting at the relatively well-off, extends medium-sized loans ranging from RMB20,000 to RMB140,000. 80% of the total transaction volume from March 2016 to June 2017 fell in this range.

Though positioned as an online lender, it’s been primarily dependent on the lending chain of Hexin Group, majority-owned by the founder and CEO of Hexindai Inc., for customer acquisition. Over 90% of the borrowers of had been referred from the physical branches of Hexin Group as of June 2017 since its inception in March 2014, according to the filing. Hexin Group claims to have 144 branches in 103 Chinese cities as of June 2017.

Hexindai Inc. doesn’t pay any fees to Hexin Group for such referrals, but borrowers acquired by the latter pay both separately.

As of June 2017, it had had 110,156 investors and 56,230 borrowers on its platform.

Source: Hexindai Inc.
Source: Hexindai Inc.