Ant Financial keeps loan delinquency low on a diet of big data, exercise in risk management
Reliance on big data and real-time credit risk management helps Ant Small Loan maintain low delinquency and NPL levels thus far
Ant Financial Services, whose Alipay platform lets shoppers pay for their online shopping on Alibaba Group Holdings’ Taobao and Tmall websites, said its big data and dynamic credit risk management help keep the delinquency of its consumer loans business at a lower rate than conventional banks and finance companies.
Non-performing loans at Ant’s Small Loan unit, defined as borrowings overdue by more than 90 days, stood at 0.48 per cent of total credits as at April 2017, according to a circular seeking to raise 3 billion yuan (US$454 million) through securitising its China loans assets on the Hong Kong exchange. For loans that were overdue by more than 30 days, the ratio stood at 0.67 per cent, Ant Small Loan said.
“The (retail cash advance business) of Ant Small Loan has showed gradual maturity in both operations and risk management...since 2016 its non-performing loan levels have shown a fluctuating downward trend, and has remained at relatively low levels,” said Chen Jie, rating analyst of Shanghai Brilliance Credit Rating & Investors Service.
The low delinquency rate contrasts with China’s state-owned banks, where the industry wide non-performing loans was at 1.74 per cent of all credits in the third quarter, according to the China Banking Regulatory Commission’s data.
Even among finance companies, Ant Small Loans’ balance sheet outperformed. Ant Small Loan’s delinquency ratio for 31 to 60 days was at 1 per cent of credits, half of the 2.5 per cent reported by another licensed finance company, Shanghai Brilliance said, citing its own study, without revealing the name of the company.
The contrast is significant, as China’s regulators last week stepped up its crackdown on online providers of small loans over concerns that many of them are engaged in predatory lending and have used aggressive practices to collect on loans from non-creditworthy borrowers.
Ant Small Loan’s consumer loans business has served over 12 million users. Its customers are individuals or companies that need short-term funding as they shop for purchases on Alibaba’s e-commerce platforms. Alibaba is owner of the South China Morning Post.
It launched a cash loans product that is unrelated to purchases on Alibaba’s e-commerce platforms. The company can quickly approve a borrower’s credit limit according to risk metrics generated by a borrower’s repayment and online behavioural data.
“After the loan has been dispersed, Ant imposes dynamic risk management on the credit limit it imposes on borrowers,” the company said. “Through its strategies on fraud detection, it is able to lower the risks of a borrower credit, fraud-related risks at an early stage.”