(Yicai Global) July 11 – (Yicai Global) July 11 -- Chinese authorities have recently stepped in to caution banks about the use of livestreaming platforms to sell financial products in order to mitigate risk, and as a result lenders have halted such services.

Banks should conduct self-inspections of all livestreamed sales carried out since 2021, including how the business was handled, how clients were reviewed and whether there were any irregularities in the process, according to a document issued by the country’s financial regulators on July 4.

Lenders such as fintech firm Ant Group’s MYbank, internet behemoth Tencent Holdings-backed WeBank, Bank of Ningbo and China CITIC Bank have been promoting loans through livestreaming, attracting customers with low interest rates and interest-free periods, such as “preferential interest rate of 3.6 percent for new customers” and “interest-free period of up to 10 days.”

MYbank, for instance, livestreamed 84 events between March and June, including 31 in June, but stopped at the end of last month.

Although livestreaming has proven to be a successful marketing model in the commodity market, from the perspective of regulators, it is not suitable for the promotion of financial products, Zhou Yiqin, founder of Guanshao Consulting and a senior financial regulatory policy expert, told Yicai Global. 

This is because the improper marketing and exaggerated publicity of financial products will have a far greater negative impact on customers than that of commodities, Zhou said. 

Livestreaming has also enabled regional banks to essentially achieve nationwide operations, Zhou said. This means that these banks are not only bypassing regional licensing restrictions but are also deviating from their mandate to only serve locally.

Most of the preferential offers in livestreaming are packaged gimmicks, a person in charge of a bank’s livestreaming business said. Low-interest loans and gifts are the two secret weapons used to attract more customers.

However, now that it is difficult for bank loan rates to fall further, livestreaming operators have to be more inventive when it comes to ‘product packaging’ in order to attract potential clients, and they are still able to win over some customers, the person said.

In terms of customer acquisition costs, there is little difference between livestreaming channels and advertising on third-party platforms, the person said. But livestreaming can attract many ‘hidden customers,’ who don’t take action in the livestreaming studios, but who usually follow up with private messages to customer service representatives or direct calls to banks.

The conversion rate of those who watch the livestreamed shows into real customers is low, the person said. This has to do with the small percentage of livestreaming viewers who could eventually pass the banks’ qualification review. 

The impact of livestreaming on banks’ business is insignificant at the moment. And so, after the intervention by regulators, lenders that were carrying out livestreaming have stopped doing so, he added.

Editors: Tang Shihua, Kim Taylor