Under the special rectification of Internet finance in 2016, consumer finance has become a new ‘blue ocean’ chased by different kinds of capitals. At the same time, the loan volume in many consumer finance companies is growing at a rapid speed.
The explosive loan growth at Ping An Puhui, a consumer finance arm of one of the biggest Chinese insurer Ping An Group, is an example of the trend.
Ping An Puhui is expected to have issued about 180 billion yuan (US$26.1 billion) of new loan volume in 2016, more than doubled of the last year.
"We are quite different from what we were in the beginning of this year," said YongSuk Cho, Chairman and Chief Executive Officer of Ping An Puhui. "We launched two products last year, and now all three of our business lines are generating profits for Ping An Puhui."
In November, Ping An Puhui attracted more than 500,000 new customers, taking its new loan sales close to 25 billion yuan. 70% of new loans came in unsecured loans, its main business line.
The business model changed after the company shifted its traditional system to a data-driven one, with no more use of its paper-based approach of accessing customer creditworthiness three years ago, Cho said.
The strategy of collecting information "of clients but not from clients" relies on a third-party data from administrative and legal sources.
Ping An Puhui’s CEO said a borrower’s repayment history on first loans is used to determine whether further credit loan could be re-issued extended.
“If a customer’s status deteriorates, we will focus more on debt collection,” he said.
“I hope we could control the credit loss within 6%,”said Cho. “Since once the rate reaches at about 8 to 10%, the industry’s ideal average, which is very easy for the losses to get out of hand and soar to 20% or 30%. We don’t want that happen.”
"At a conservative estimate, China’s consumer-credit market will swell to 52 trillion yuan by 2020, with the participation of non-bank financial institutions rising to nearly 20% from nearly 5% now," CHO said: "Among this 52 trillion yuan, China’s non-bank financial institutions are expected to take 20% which is about 10 trillion yuan, and we hope to achieve 10% share of this market by that time."