China

Survey Open for New Study on Asian Fintech

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The University of Cambridge, Monash Business School and Tsinghua University launch the 2016-2017 Asia Pacific Alternative Finance Industry Survey with the support of major industry associations across the region.

The Cambridge Centre for Alternative Finance at University of Cambridge Judge Business School, Australian Centre for Financial Studies at Monash University and Tsinghua University Graduate School at Shenzhen are teaming up to launch the 2016-2017 Asia-Pacific Region Alternative Finance Industry Survey with the support of more than 20 major industry organisations across the region. This is the largest regional study to date focused on crowdfunding, peer-to-peer lending & other forms of alternative finance.

From equity-based crowdfunding to peer-to-peer consumer and business lending, invoice trading to reward-based crowdfunding, these alternative financing activities are supplying credit to SMEs, providing venture capital to start-ups, offering more diverse and transparent ways for consumers to invest or borrow money, nurturing creativity, fostering innovation, generating jobs & funding worthwhile social causes across the Asia Pacific region.

Opening on February 15th 2017, this benchmarking survey aims to capture the key trends, developments, size, transaction volume and growth as well as the impact of changing regulations on the alternative finance markets across Asia in 2016 – building on last year’s inaugural study.

Last year’s inaugural report – Harnessing Potential – gathered survey data from 503 leading alternative finance platforms operating in 17 Asia-Pacific countries and regions. The study was cited by over 100 mainstream media organisations and has informed policymakers and regulators of industry developments in Asia Pacific countries including Malaysia, Singapore, India, Australia, Hong Kong and Indonesia for example. The report estimated the total Asia-Pacific online alternative finance market to have grown 323% year-on-year to reach 102.81 billion USD in 2015. China is the world’s largest market by transaction volume, registering 101.7 billion in 2015. Outside mainland China, the rest of the APAC region accrued 1.12 billion USD in 2015 with a 313% year-on-year growth rate from the 271.94 million raised in 2014. The authors hope this year’s study will dive even deeper into the growth and dynamics of the APAC alternative finance market. Continue reading →

Development and Regulation of P2P Lending and Equity-based Crowdfunding in Hongkong

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This is a guest post by Hungyi Chen, Ph.D. candidate at the Graduate School of Law, Nagoya University. He is researching alternative finance in East Asia.

1. The recent development of online alternative finance

Given the recent trend that Fintech is rapidly growing in the world, in order to maintain the role of international financial center, the financial authority of Hong Kong has been aware of issues relating to Fintech industry[1]. On November 13th, 2015, Stored Value Facilities Payment Systems, such as online stored payment business as PayPal, is allowed to operate by non-bank[2]. This is a milestone for Hong Kong including non-bank of operating business highly relevant to conventional bank.

In order to enhance the development of startups in Hong Kong, financial technologies (Fintech) are emphasized by the authority since the investment of Fintech is a target of many venture capitalists[3]. Nevertheless, compared with other jurisdictions in Asian countries, which already lightened entry requirement to encourage non-bank for engaging business of equity-based crowdfunding, such as Japan, Korea, Malaysia, Taiwan, and Thailand, the entry requirement of Fintech, especially alternative finance may be stricter in Hong Kong.

Until now, there is still no equity-based crowdfunding platform established in Hong Kong. However, the huge demand from capital market gradually leads the development of crowdfunding in Hong Kong, especially debt-based crowdfunding, which is also known as Peer-to-Peer Lending. Currently, there are 4 major peer-to-peer lending platforms, including BestLend, GoLend, Monexo, and WeLend.

2. Relevant industry background

With unique selling factors, the peer-to-peer lending platforms may have a rapid growth in the near future. On one hand, from viewpoints of investors, the deposit rates of savings are from 0%~0.001%[4]. Even the deposit rates of fixed deposit of 12 months are from 0.15%~0.2%[5]. Additionally, inflation rates are around 4% continuously in 2013 and 2014[6], which means the real interest rate may be negative in Hong Kong. Accordingly, there are strong incentives for investors to vitalize their capital.

On the other hand, from viewpoints of borrowers, there are two fundraising channels for loans, including banks (Licensed Banks, Restricted License Banks, Deposit-taking Companies) and Money Lenders. Since the financial authority restricted the mortgage market of banks to prevent a real-estate bubble, it is difficult for borrowers to get the loan amount they need from banks by mortgage. As a result, they turn to Money Lenders as an alternative opportunity. Although the interest rates of Money Lender are generally higher than banks, compared with banks which normally take 1-6 weeks for examining procedure, the process of Money Lender is more simplified[7]. Continue reading →

Ppdai Closes Series B Round

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Shanghai-based p2p lending service Ppdai.com has completed series B round (rumoured to be at 45M US$). The round was led by Lightspeed China Partners, an early stage investment company. Wealth management company Noah Private Wealth Management and Sequoia Capital also invested.

The Largest P2P Lending Service Is …

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… Creditease.cn in China. Founded in 2006, Creditease has grown strongly and now has 2,200 employees in 20 cities. The new loan volume originated each month is about 25 million US$.

Only the lender offer is available online. The borrower application is mainly an offline process, with all borrowers subject to a 30 minute personal interview. After background checks about 20% of applications succeed. According to the company, the historical default rate is at a low default rate of 1%.

The maximum loan amount is 60,000 RMB (approx 9,100 US$). Figures on the fee for borrowers differ but most secondary source quote 1 to 10% of the loan amount.

Lenders don’t choose individual borrowers but rather select a term length between 3 and 12 month. Based on this selection they get interest rates between 7 and 10% p.a. Minimum investment is 100 RMB (about 15 US$). Returns are automatically reinvested. Lending is fee-free and lenders do not bear the default risk, as these are covered by Creditease’s  Risk Fund.

Additionally Crediteasy has a p2p microfinance offer, where it partners with local MFIs to loan to woman in rural area. On these p2p microfinance loans lenders have the option to get 2% interest.

Founder Tang Ning, a graduate of Peking University, said in mid 2010 that he sees CreditEase in the second phase of a 3 phase development and currently the focus is to build a larger customer base. In 5 years he aims for CreditEase to be a brand name as well established as EBay.

(Sources: company website, ceibs.edu, Beijing Rundschau, GlobalTimes.cn, China.org.cn)

P2P Lending Service Ppdai growing in China

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The Chinese p2p lending service Ppdai.com announced that over 2.5 million RMB (approx. 365,000 US$) in loans were facilitated since it’s launch.

“We witnessed strong growth in 2008 and incredible growth in the first quarter of 2009. In less than one year we have achieved over 2 million RMB in loans with roughly half a million RMB in March 2009 alone. … . What we realized was that we were able to provide a solution that has gained popularity as the global credit crisis worsened and left many borrowers with little alternative for funding.” Said Jack Gu, PPDai’s CEO and Founder.

Being that China does not have a robust credit rating system for consumers, the company developed its own proprietary credit system to filter potentially good borrowers from bad borrowers. This system creates a unique profile for each borrower and leverages other Chinese platforms such as TaoBao to accurately project whether a borrower has the financial ability to pay back a loan. PPDai’s credit rating system has helped achieve loan default rates of less than 2% for 2008.

“PPDai’s core value is to create a well customized credit scoring system for Chinese borrowers,” said Tony Li, PPDai’s Director, “We believe that this is the main reason why investors have been willing to lend money to borrowers on the PPDai network.”

PPDai closed an initial round of financing from Essentia Equity in March 2008 and is about to raise an additional round in the third quarter of 2009.

“We were attracted to PPDai because it offers a unique opportunity to benefit from the extraordinary growth being witnessed in China,” said Roy Sebag, Managing Partner at Essentia Equity, “There are currently 298 million internet users in China and an offline non-banking lending market that is said to be in the range of over 1 Trillion RMB per annum.”

(Source: press release)