This amount is already the same size as a Chinese city commercial bank’s whole retail business, which is generated through several decades. It is an extraordinary achievement considering Wechat loan was only launched in May 2015.
|Wechat Loan|| |
Bank of Shanghai
Bank of Ning’bo
Bank of Hang’zhou
Bank of Jiang’su
Bank of beijing
Retail Loan Balance 2016 (RMB billion)
|100 (August 2017)|| |
Wechat Loan is an online lending product from Webank. Selected individual borrowers can borrow from RMB500 to RMB300,000 without any collateral. Its standard interest rate is 18% annually with a borrowing period from one single day to 20 months. It gives borrowers the flexibility to borrow and return at any time.
Different than retail loans from traditional banks, which mainly consist of mortgages, Wechat loan aims to provide financial inclusion in China. According to data from this year’s Lendit Shanghai conference, Wechat loan has acquired over six million customers from age 18 to 55, and the average borrowing amount is RMB11,700 per person. Half of the borrowers do not have credit history at PBOC, and 75% are non-white-collar workers.
The incredible loan expansion is mainly due to the customer and data base accumulated at QQ and Wechat. It gives Webank a big advantage in customer acquisition and risk management. Another important reason is the convenience and efficiency of Wechat loan. To apply for an unsecured loan from traditional banks, borrowers normally have to go through piles of documents and wait for weeks. On the other side, it only takes 0.3 seconds for Webank to approve a loan application without going through complicated process. Finally, Webank has the support from traditional banks. By the first quarter this year, Webank was already cooperating with around 40 traditional banks in China. For each Wechat loan, 80% of the capital is from traditional banks and is marked in the banks’ balance sheets. The profits are also shared between Webank and its partners.
With a fast growing loan book that is mainly serving a riskier group of individual customers, people have raised concerns about the risks. However, it seems under control. By the first quarter this year, the non-performing loan rate is only 0.43%.
In only two years, a single product has achieved the scale of a traditional bank’s whole retail lending size. What is more, Wechat loan has not opened the service to all of its one billion users on Wechat. It has only invited 700 million users at the moment and only invited users can see the function on Wechat app. In the future, when the service become available to the rest of consumers, the number will be even higher. The success of Wechat loan is just one example of the development of financial services in China today. When Webank /Tencent, or other big digital players develop more products in the financial industry, the influence may be beyond our imagination.