Chinese Online Loan Platforms Link Up With Banks to Tackle Compliance Issues
Yicai Global
/SOURCE : Yicai
Chinese Online Loan Platforms Link Up With Banks to Tackle Compliance Issues

(Yicai Global) Jan. 16 -- China's online consumer loan platforms are turning their efforts to cooperating with banks and consumer finance companies to secure cheap funds and new customers.


Many platforms work alongside traditional lenders and consumer finance firms to carry out business. This cooperation enables them to pool funds cheaply, said an industry insider. The role of channels and technology suppliers also help platforms solve compliance problems.


"In terms of supervision and compliance, both online consumer loan platforms and those of other types are challenged by a lack of lending qualifications, which will become a major hidden problem in the future," said Zhu Mingchun, founder of peer-to-peer lending site Partnering with banks will help solve compliance issues, at least from the perspective of fund sources.


Online financial platform Wolaidai recently worked with 11 banks and consumer finance companies and released relevant joint cooperative products. These firms include the Postal Savings Bank of China Ltd. [HKE:1658], Guangdong Nanyue Bank Ltd, Jincheng Consumer Finance LLC and Jinshang Consumer Finance Co.


As well as such companies, Wolaidai's future partners will include manufacturers, e-commerce firms and operators, said Chief Executive Simon Loong. Hong Kong-based WeLab, which owns Wolaidai, will also release products with loan limits of CNY500,000 (USD72,462) or more.


"Banks will focus on consumer loans as a new area for business growth," said an insider at a commercial bank. Banks are unfamiliar with the consumer finance market, which also cooperates with external platforms to develop new sectors and reduce costs.


It is not an easy job for online loan platforms to tie up with banks or access their funds. "Funds from institutions are good, but given such factors as volumes and risk control, these funds are not easily accessible," said Fang Yihan, chief executive officer at CreditEase. "In fact, the cost of funds that we really obtain are not as moderate as expected."


Loong agrees that online loan platforms cannot easily cooperate with banks. Banks have strict requirements and expect platforms to be able to attract customers, but it is also critical for them to recognize platform's risk control teams. Most platforms are unable to cooperate with banks, and it isn't feasible to overcome problems in this way.

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