Have phone will borrow: Here’s the latest tech play on China’s spendthrift youth

Mainland Chinese youth are willing to borrow money for the latest ‘must have’ consumer items, but are underserved by traditional banks

PUBLISHED : Tuesday, 14 November, 2017, 7:39pm
UPDATED : Tuesday, 14 November, 2017, 11:03pm

An online lender targeting spendthrift 24 to 36 year olds is the latest fintech firm from China to bet on the willingness of Chinese youth to go into debt for the newest smartphone – and on the willingness of US investors to bid up its shares.

Shenzhen-based Lexin Fintech Holdings, which operates an online e-commerce platform offering instalment shopping, is following in the footsteps of Chinese microcredit providers Qudian and Hexindai which raised US$900 million and US$50 million in their US IPOs in October and November, respectively.

What they all have in common is a customer base of millions of young, educated mainland Chinese adults who, unlike their parents and grandparents, are willing to borrow money to buy the latest “must have” consumer items. This demographic is also generally under served by traditional banks in China due to their lack of credit information, according to Lexin.

They were also out in force for the recent Singles’ Day shopping festival, which saw sales on Alibaba’s e-commerce platforms reach 168 billion yuan (US$25.3 billion). During the first hour of the 24 hour shopping spree the number and value of orders on the Fenqile platform rose three and six times respectively compared with the same period last year. Apple’s latest and most expensive handset, the iPhone X, was the top choice among consumers using the Fenqile platform. The 256GB iPhone X was available for 36 monthly instalments of 360.5 yuan per month, with no down payment required.

Baitiao,’s credit loan product that allows deferred payment on purchases made on its own e-commerce platform, reportedly saw transactions surge 450 per cent year-on-year during the first hour of sales on November 11.

On Monday, Lexin Fintech officially filed an application with the US Securities and Exchange Commission with the aim of raising US$500 million through an initial public offering on Nasdaq under the stock code “LX”.

Lexin’s founder and CEO Xiao Wenjie, 34, who worked for Tenpay for 10 years, holds a 36.6 per cent share of the company, according to the prospectus. Tenpay is the mainland Chinese online payment platform owned by Shenzhen-based technology giant Tencent.

Lexin is also backed by the second largest e-commerce platform in China,, which owns 11.9 per cent of the shares in the company.

Joint book runners for the Lexin listing include Goldman Sachs (Asia), Bank of America Merrill Lynch, Deutsche Bank, and China Renaissance, the company’s IPO prospectus shows.

Lexin’s primary business is its online consumer finance platform called Fenqile, which specialises in selling products on instalment. Consumers are able to purchase products by selecting instalment options after they complete credit assessment procedures on the platform. Instead of providing loans to consumers directly, Lexin matches customers with other funding sources including institutional funding partners, investors of its asset-backed securities, and individual investors, according to the company.

Lexin is “strategically focused on serving the credit needs of educated young adults in China”, the company said in a statement.

Founded in August 2013, Lexin has more than 20 million registered users of whom 6.5 million have approved credit lines as of the end of September 2017. The annual interest rate charged is 25.3 per cent, with an average loan tenor of 9.4 months and average customer loan balance of 5,902 yuan for the first nine months of 2017, the company said.

The platform uses a credit assessment engine called “Hawkeye” to determine the qualifications of a potential online borrower. Using proprietary data from over 6.5 million customers and 22 million credit applications accumulated since its inception, and by applying algorithm models, the company is able to complete the assessment on 95 per cent of all loan applications within seconds, with “more comprehensive credit analysis of its customers than traditional financial institutions”, according to Lexin.

Alibaba owns the South China Morning Post.