Ant is changing the way consumers borrow money from its app
Ant is changing the way consumers borrow money on its app
In December 2020, Beijing set a guideline for Ant Group to “rectify” its business after the cancellation of its IPO, which could have been the biggest initial public offering in history. In the plan, regulators asked Ant to revamp its credit business, among other changes that would subject it to the same set of regulations governing financial institutions. In other words, Ant can no longer be content with its freewheeling practices by calling itself a “tech” company.
Almost a year later, the Alibaba-affiliated fintech powerhouse showed that it had almost completed the restructuring of its popular consumer credit products.
Lending products contributed nearly 40% of Ant’s revenue in the six months to June 2020, according to the company’s prospectus filed last year. The two main products are Huabei (Spend), which was launched in 2014 for consumers’ daily spending, functioning as a virtual credit card. A year later, Jiebei (Borrow) was introduced as a credit product for larger consumer transactions.
Under the old model, Ant created loans that were then guaranteed by third-party banks and other financial institutions. As of June 2020, about 98% of Ant’s credit balance from its platform was collateralized by its partner financial institutions or securitized, according to the company’s prospectus.
Jiebei has split into two brands, users reported earlier this week. Lines of credit granted by third-party banks are now called Xinyong Dai (credit loan) on Alipay, Ant’s flagship financial services app. Those provided by Ant’s consumer finance company, which was recently created at the behest of regulators, remain under the Jiebei brand.
Huabei has also begun a restructuring, which will show users which loans are independently issued by banks and which by Ant’s consumer finance company. Huabei will focus on “low cost” daily transactions, it said in a Weibo post.
“As a result of brand differentiation, users requesting loan services will have more information about their credit providers to avoid brand confusion.”
Huabei also noted that it now submits consumer credit information to a database overseen by China’s central bank. He started the routine in September after setting up his consumer finance company, which, like banks, must report its credit information to China’s central bank.