One of China’s largest online wealth management platforms is leaving its peer-to-peer lending (P2P) business behind.
Three sources have told Reuters that Lufax, which is backed by Ping An Insurance, will exit P2P due to tougher regulatory issues in China. While it is unknown when the business would shut down, the sources revealed that the company has already started the process of applying for a licence in consumer finance, which it will focus on. In addition, the P2P division's employees will reportedly move to the consumer finance business.
Both moves could help Lufax again pursue a stock market listing, which was postponed last year because of uncertainty over China’s consumer lending regulation. Those new restrictions is the reason the startup is abandoning its P2P business, with Lufax struggling since 2016 to meet requirements that required these lenders to register with local authorities. The firms are now required to record the flow of funds between various parties and accounts, provide reports on online deposits and establish an accounting system with well-defined and standardized fund deposit clearing. In addition, lenders, borrowers and guarantors also must be registered.
When asked to comment, Ping An Group and Lufax said Lufax's P2P business is run in accordance with regulatory requirements and “the online business is operating normally and existing products and customer rights are not affected."
But the sources said that Lufax will instead focus on consumer finance, a market that is growing fast in China. The company already offers wealth management products, although those products shrank by 20 percent to 369.41 billion yuan ($53.72 billion) in 2018. Company filings also showed that outstanding loans on the balance sheet reached 375 billion yuan by the end of 2018, up 30 percent from the previous year.
In December, Lufax raised $1.33 billion in a funding round from a dozen investors that valued it at $38 billion.