9F, fintech company with 63 million mainland Chinese users, eyes Hong Kong virtual banking licence

Company among applicants for first batch of licences to be issued by Hong Kong Monetary Authority

PUBLISHED : Monday, 10 September, 2018, 12:03pm
UPDATED : Monday, 10 September, 2018, 10:48pm

Mainland Chinese financial technology company 9F Group has teamed up with local and international firms to apply for a virtual banking licence in Hong Kong.

The company, set up in Beijing in 2006 by founder and chief executive Sun Lei, who was among China’s first internet finance entrepreneurs, has more than 63 million users – of these, more than 8 million in the Greater Bay Area.

“We would like to use Hong Kong as a platform for 9F Group to expand internationally. This is why we have taken over Primasia Securities Asia, a Hong Kong securities firm, and Yue Tung Wealth Management, an insurance broker, in the past two years. And now we want to get a virtual banking licence,” said Samuel Lin Yanjun, chief executive of 9F’s international business and CFO of the group.

Hong Kong draws 29 applications for virtual bank licences

Lin declined to name 9F’s international partner but did say the fintech company was operating a virtual bank overseas. Other partners include Hong Kong-listed fintech company VST ECS, which reported HK$54 billion (US$6.88 billion) in sales last year. Lin said 9F had a controlling stake in the joint venture.

“The stock market may still be volatile in the coming months because of the US-China trade war, but we believe this is a good time to start a virtual bank. We plan to invest about HK$1 billion in this joint venture. We have a long-term commitment to Hong Kong, which is a financial hub for mainland China and Asia,” he said.

Along with its partners, 9F is among 29 applicants for the first batch of virtual bank licences to be issued by the Hong Kong Monetary Authority. The authority has not said how many licences it will issue.

Lin said virtual banking, because of the lower running costs involved, would let 9F offer small loans and still be profitable. The company has hired veteran Hong Kong banker Patrick Ip Koon-tung to be the managing director of 9F International Businesses, and to manage the virtual banking business.

“We will offer bank loans of say HK$50,000, on average, to technology-savvy customers and offer more to small and medium-sized enterprises,” said Ip. “We will work with some lifestyle companies, such as furniture firms and retailers. When customers make purchases at these shops, they will be able to get bank loans quickly, if we get the licence.”

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Joseph Tong, chairman of the GEM-listed furniture shop Tree Holdings, one of the partners in the joint venture, said customers who buy furniture at his shop will get instalment loans.

“On the mainland, we have already teamed up with lifestyle shops and hospitals to offer loans to customers. The same model will work in Hong Kong,” said Lin.

The company uses big data and its own credit scores model to make it simple and easy for customers to apply for loans online.

“We collect information from customers and public credit bureau data, and classify the customers into seven levels of credit scores. We focus on lending to customers with mid level scores,” said Lin. “The ones with low scores will be too risky, while those who have top credit scores may be enjoying very good banking services provided by traditional banks. It will be hard for us to compete with the traditional banks.”

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9F took over Primasia Securities Asia in 2016 and last year turned it into an online broker that collects client orders through a smartphone app for stock trading.

The company also plans to build on its acquisition of Yue Tung Wealth Management, bought in 2017, to expand into the online insurance business.

“We have kept all the existing Hong Kong staff from the securities firm and the insurance broker. We appreciate local talent, which can help us to understand the Hong Kong market. Hong Kong has very good financial regulations and well-trained people, while we can offer new technology. It is a very good combination for our future development,” said Lin.