China’s online lender Lufax recalibrates business model as regulators clamp down on Big Tech lending

Lufax has lowered annual percentage rates (APRs) on loans to 24 per cent and made sure its services are unbundled

Lufax to raise credit exposure to 20 per cent by end June; checking with regulators if ‘skin in game’ must rise to 30 per cent

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Lufax ADRs have had a bumpy ride since the fintech giant listed in October as investors digest fast-evolving fintech regulation in China. Photo: Reuters

Published: 5:30pm, 2 Dec 2020Updated: 11:02pm, 2 Dec 2020

Lufax Holding is overhauling the way it digitally matches borrowers and lenders as China clamps down on Big Tech companies extending credit in the world’s second-largest economy amid fears the platforms could be a source of financial instability.

The Shanghai-based firm is lowering interest rates on loans; raising the capital contribution that it makes to loans; and has checked it does not bundle services for customers. Lufax is also widening the array of banks that it works with on lending and is verifying that its disclosure to borrowers is fully compliant with fast-evolving rules.

Lufax, backed by China’s biggest insurer Ping An Insurance (Group), is one of the first major financial-technology companies to lay out how it will adjust in the light of tighter and more complex regulation governing the provision of credit to individuals and small businesses. It is the largest publicly traded online lender in China, following a US$2.4 billion stock sale in October in New York.

“As planned, we also continued to make progress in establishing a more sustainable risk-sharing business model with our funding partners,” said Lufax CEO Gregory Gibb during the company’s third-quarter earnings call on Wednesday.

Lufax CEO Greg Gibb sees more fintech guidance as soon as in the coming weeks. Photo: Handout

Alarmed by spiralling online consumer debt this year, China is clamping down on the fast-growing microlending industry, calling it a threat to social harmony and financial stability.

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