China Fintech Newsletter – Dec.4-10

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 Newsletter -Nov.27 -Dec.3[Updated]

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.

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

China Fintech Newsletter – Nov. 6-13

Ant Financial & Alibaba

Alipay processed a total of 1.48 billion payment transactions on November 11th, Alibaba’s annual shopping day, up 41% from last year, with 256,000 transactions per second at peak.

Total mobile GMV settled through Alipay was 90% of the total (US$25.3 billion), compared to 82% last year.

A total of 860 million consumer insurance policies were sold during the day.

Ant Cash Now (借呗), a small loan product available for Alipay users, issued 23.97 billion yuan (US$3.6 billion) ABS (asset-backed securities) in October.

Ant Cash Now and Ant Check Later (花呗), a line of credit for Alipay users, had each issued more than RMB100 billion (US$15 billion) ABS in the first ten months of this year. (Source)

Ant Financial and healthcare tech startup Linking Cloud co-developed a credit option for hospital visits.

Alipay users with a Zhima Credit Score above 650 can get a 1000 yuan (US$150) loan before making a hospital visit. Their accounts of Ant Check Later (revolving account) will automatically be charged afterward. (Source)

Ant Financial began to offer credit options for hospital bills in February 2016, according to Zhima Credit., a leading food delivery service affiliated to Alibaba, has recently added a short-term micro-loan product. Users can take out loans from 500 yuan (US$75) to 2000 yuan (US$300) and choose to pay off in 7 or 14 days. (Source)

JD Finance

Online retailer JD launches a mobile app for the direct bank it co-established with a local bank, Bank of Dalian. The current offerings on the app, called Yibanke (壹伴客), include Liandabao (连大宝), a money market fund, and Lianxintou (连心投), a peer-to-peer financing platform. It plans to roll out a wide range of offerings including lending and investment products platforms, and robo-advisors. (Source)

JD launches its financial cloud platform that offers various solutions ranging from risk management systems to marketing services.


Tencent’s financial cloud business has reached a deal with China Merchants Bank that the latter would adopt its AI-based fraud prevention technology. (Source)

Funding & Others

WeLab, a Hong Kong-based mobile lending startup, has raised US$220 million in a new round of equity and debt financing from Alibaba Hong Kong Entrepreneurs Fund, China Construction Bank (International), Credit Suisse and International Finance Corporation. The raise brings it to US$425 million in total funding.

The company uses unstructured mobile data and its own proprietary system for credit decisioning. WeLab also licenses its technology to banks and telcos.

WeLab operates Wolaidai (我来贷)in mainland China and WeLend in Hong Kong. Founded in 2013, the company claims it has signed up a total of 25 million users and processed US$28 billion in total loan originations.

Online marketplace lender PPDAI raised US$221 million in a downsized IPO. — Bloomberg

Online car sales and financing platform Yixin has set price range to raise up to US$900 million in Hong Kong IPO. — Caixin report

Qudian reports 308% YoY increase in total revenue and 260% increase in operating income for the third quarter. Financing income increased 214% YoY and sales commission fee increased almost 15 times.

Active borrowers increased to 7.5 million from 2.7 million a year ago.

China Rapid Finance reported Q317 earnings. Total loan volume and the total number of loans increased 250% and 490% YoY, respectively. Total fees billed and net revenue increased 62% and 125% YoY, respectively. Net loss increased 11% YoY. The company expects to turn a profit in the fourth quarter.

China Fintech Newsletter – Oct.30 – Nov.5

Tencent’s WeChat begins selling insurance through WeSure, an insurance broker in which a subsidiary of Tencent holds a 57.8% stake. Incorporated in October 2016, WeSure only received regulatory approval at the end of September.

Currently only a health insurance plan provided by Taikang, one of the four insurers that hold an online-only insurance license, available on WeChat and only 1% of WeChat users can access it. WeChat reported over 963 million monthly active users in the three months to June.

Tencent has made a few other investments in online insurance. A subsidiary of Tencent holds a 15% stake in Hetai Life Insurance, an online-only insurer established in January 2017. British insurer Aviva announced in January this year to establish a digital insurer in Hong Kong together with Tencent.

Tencent co-established ZhongAn Online P&C Insurance, the leading online-only insurance company in China, together with e-commerce giant Alibaba and Ping An, a leading insurance company, in 2013. ZhongAn was the first to obtain an online insurance license.

The total volume of loan originations through Chinese online peer-to-peer lenders has declined for three consecutive months to RMB218.4 billion in October, according to WDZJ, a local media outlet focused on online lending. WDZJ believes it’s due to the long National Day holiday and the recent regulatory crackdown on online finance.

The total loan balances reached RMB1.17 trillion as of October, a 71% year-over-year increase. The total number of online lending platforms decreased 8% year-over-year to 1975, according to WDZJ data.

Yixin Group, which operates an online car sales site and also provides auto financing options, has submitted IPO application to the Hong Kong Stock Exchange.

Facilitating both new and used car sales, the site offers a variety of financing options, including straightforward car loans, installment plans and leasing, and auto insurance.

Yixin Group is a subsidiary of BitAuto (NYSE:BITA), or, an online portal for car information and listings. Investors in Yixin Group include three Chinese tech giants, Tencent, JD and Baidu. Its website and mobile apps have combined 50 million monthly active users, according to the company.

ZhongAn Online P&C Insurance, the leading online-only insurer, unveils ZhongAn Information Technology Service Co., Ltd. (ZhongAn Technology), a wholly-owned subsidiary that provides business-facing tech solutions for finance and healthcare industries. It has launched a variety of services based on technologies such as blockchain, cloud computing, big data and artificial intelligence.

Facial recognition tech developer Megvii, a.k.a. Face++, has raised US$460 million in Series C round of funding led by a state-owned venture capital fund and joined by Ant Financial (Alibaba’s finance arm), Foxconn Group, and a few other investors. (Source)

Its technology is powering Alipay, the leading online payment service under Ant Financial. Other customers of Face++ include smart device maker Xiaomi and Lenovo. More than 50,000 developers have adopted its technologies.

JD Finance, the finance arm of online retailer, unveils Jingdong Chaonao ( “Super Brain”), a facial recognition system. It has been implemented in JD Finance’s mobile app that supports facial recognition payments at physical shops. (Source)

JoinQuant, a quantitative trading platform, has received Series B funding from WisdoMont. (Source)

Online marketplace lender PPDAI has set IPO price range to raise up to US$298 million. The company plans to list on the NYSE.

Consumer lender Hexindai debuted IPO on the NASDAQ.