In any new technology arena, companies are born, they rise, they fall, sometimes with breathtaking speed. Regulations take shape, usually quite a bit more slowly.
So it is with the Chinese alternative lending space, with various nomenclature in place, seemingly interchangeable, embracing P2P loans or internet lending – in short, funds flowing outside the confines of the bank branch and the teller window.
The industry was an unregulated one until just a few years ago, when loans on various (virtual) books touched a couple hundred billion RMB. The Chinese government, as noted in CB Insights and elsewhere at the time, released a set of guidelines geared toward “advancing the healthy development of internet finance” and placing the industry under the purview of the China Banking Regulatory Commission. Online lending had some restrictions in place, where there could no longer be guaranteed returns and lenders could not cover losses via guarantees.
The industry thrived to as much as 1 trillion RMB last year. Amid the thousands of lenders – where individuals and smaller firms sought and still seek funds – scores of platforms went under. The government, as headlines have noted through the past several months, has basically targeted thousands of lenders toward elimination, with a licensing mandate and stricter capital requirements in place.
Against this backdrop, and with loan limits in place amid the shakeout, some firms see opportunity for technology to bring financial services to the masses, beyond the reach of state-owned banks – and beyond P2P lending.
WeLab is looking to move beyond mobile lending – it provides unsecured personal loans to borrowers – and into virtual banking, CEO Simon Loong told CNBC. The idea is to grow with its customer base. The executive said that five years ago, the typical customer had been in his or her 20s and may have needed access to funds, but now they would seek wealth management and banking services.
“The first generation of FinTech firms were trying to find solutions and grab market share by themselves,” said Loong. “The second phase of it is where we started working with banks. And the third phase of it is — financial services, conglomerates across industries all coming together to see how FinTech can help them to grow their business,” he added.
Among those multi-pronged initiatives is a linkup between WeLab and conglomerate CK Hutchison, which will bring both consumer lending and sales financing (i.e., installment plans) to 3Shops and Fortress stores located in Hong Kong, and other CK Hutchison businesses based in mainland China, Indonesia and Europe.