English

By Yin Lei

More Chinese internet firms are venturing into consumer finance to turn their huge traffic into massive cash inflows, as reported by the Shanghai Securities News on Wednesday.

Their target, microcredit programs, had been the typical sources of income for China's veteran internet giants in the past few years, such as Baidu, Alibaba, and Ele.me, which tapped their large pools of online users via the provision of consumer finance services.

Now newcomers are setting foot in this field to also take a share from this market by forming partnerships with licensed financial institutions. Such internet companies include online Chinese news giant toutiao.com, car-hailing service provider Didi, and bike-sharing startup Ofo, etc.

Toutiao.com, which already had 120 million daily active users a year ago, as revealed in its financing document, raked in an advertisement revenue of RMB 15 billion in 2017. This may have generated a net profit of about RMB 2.7 billion, calculated at a profit margin of 18 percent that was enjoyed by one of its competitors at home.

The licensed financial institutions also see big potential in such partnerships because of the large number of prospective customers available from these internet giants. One company dealing in consumer finance said most of its customers came from platforms with massive traffic volumes, e.g., the online retailing behemoths Alibaba and JD.com.

These newcomers exhibited a distinction from the veterans in that they act only as an intermediary to introduce the services of the financial institutions to their users.

The veterans, on the other hand, had a different business model. They served multiple roles, taking on risk control, conducting collections, offering credit enhancement and charging fees on the borrowers. Last year, this kind of business model was outlawed by financial regulators.

Despite this difference in the business models, the path ahead for the newcomers may still have many uncertainties, the report pointed out. Against the backdrop of tightening financial regulations, a turning point is on the horizon for the consumer finance sector as a whole.