China Rapid Finance casts eye towards untapped consumer base via partnerships with tech giants
China Rapid Finance, operator of the mainland’s fastest-growing online consumer lending platform, is seeking broader partnerships with major domestic internet companies and big data firms as it aims to cover the 500 million people who are underserved by the nation’s big financial institutions.
Zane Wang Zhengyu, the chairman and chief executive of China Rapid Finance, said those alliances are vital to reaching that unique market segment he calls EMMA, which stands for China’s emerging middle-class, mobile-active consumers without formal credit history.
“With data from the digital footprints of these people from their internet and mobile usage, we can use our proprietary technology to establish credit scores,” Wang said.
At the end of 2014, the Chinese central bank’s database covered around 800 million consumers, of which roughly 300 million had credit records.
That leaves about 500 million people who cannot borrow money from traditional financial organisations, Wang said.
He pointed out that these EMMA consumers in China have generated a tremendous amount of data, even if they lack a proper credit history. These included data from online search, social networks, online shopping and payments.
The mainland’s nascent peer-to-peer lending industry involves third-party investors lending money to unrelated individuals, or peers, through online marketplaces outside of traditional banking channels.
China Rapid Finance, which recorded 600,000 active borrowers at the end of December, recently started working with Chinese online search giant Baidu to tap its vast user base.
Early last year, the lender partnered with Tencent Holdings to launch a campaign that pre-approved low-cost and low-interest loans to about 50 million users.
Alibaba Group remains the only one of China’s “Big Three” internet players which has not partnered with China Rapid Finance. Alibaba is the owner of the South China Morning Post.
“We are very much interested in all data partners. We do not want to exclude anyone,” said Wang. He added that there were also 200 big data services providers on the mainland with more than 100 million active users.
Big data refers to the vast quantities of unstructured information generated from digital sources, which are analysed to gain insight into customers, trends and business activities.
Wang said the “multi-channel, multi-data strategy” of China Rapid Finance enables it to reach more borrowers from the EMMA consumers with loan amounts that start from 500 yuan (HK$600).
“We’re building more of an Uber type of business,” he said. “We have a one-time upfront acquisition cost, let our users be comfortable with the service and encourage repeat business to help them build up credit history.”
China Rapid Finance has recorded more than 5 million transactions, from February last year to the end of January.
Consultancy Oliver Wyman has forecast mainland China’s peer-to-peer market to be worth 5.4 trillion yuan by 2020, up from an estimated 400 billion yuan last year.