Glut of ways to pay

E-com­merce is de­liv­er­ingmyr­iad new op­tions for pay­ment and credit, shak­ing up the tra­di­tional credit-card in­dus­try and mak­ing it eas­ier both for com­pa­nies to as­sess risk and to pro­vide credit for less-es­tab­lished cus­tomers

China Daily (USA) - - WUZHEN - By JIANG XUEQING jiangx­ue­qing@ chi­nadaily.com.cn

Con­sumer credit prod­ucts are b e com ing in­creas­ingly pop­u­lar among young Chi­nese, tak­ing a large mar­ket share away from credit cards, as com­pe­ti­tion in the pay­ment in­dus­try grows more in­tense.

JD.com Inc, a ma­jorChi­nese e-com­merce player, re­cently launched a per­sonal con­sumer credit ser­vice called Baitiao with a max­i­mum credit line of 15,000 yuan ($2,187). It al­lows the client to buy prod­ucts first and then choose be­tween de­lay­ing pay­ments for up to 30 days and re­pay­ing in in­stall­ments.

Risk as­sess­ment is made on all clients based on a wide range of in­for­ma­tion, in­clud­ing their lo­gins on JD.com, on­line shop­ping habits and changes of ad­dress, said Xu Ling, vice-pres­i­dent of JD Fi­nance, the con­sumer fi­nance sub­sidiary of JD.com.

“We col­lect in­for­ma­tion mostly through au­to­ma­tion, re­ly­ing nei­ther on the client for in­for­ma­tion sub­mis­sion­noron man­ual in­ves­ti­ga­tion,” he said. This is un­like com­mer­cial banks that col­lect in­for­ma­tion on­the clients­byask­ingth­emto pro­vide em­ploy­ment and in­come cer­tifi­cates, as well as prop­erty and car own­er­ship cer­tifi­cates.

Then, JD Fi­nance launched a spe­cial­ized Baitiao ser­vice tar­get­ing col­lege stu­dents with lower credit lines. This kind of prod­uct fills the de­mand-sup­ply gap left by com­mer­cial banks, which ei­ther stopped is­su­ing credit cards to col­lege stu­dents or raised the thresh­old of credit-card ap­pli­ca­tion for stu­dents in the last few years due to higher de­fault risks among the group.

The rapid growth of con­sumer credit has greatly af­fected the tra­di­tional credit-card busi­ness. Sta­tis­tics from the Peo­ple’s Bank of China, the cen­tral bank, re­veal that China is­sued a to­tal of 432 mil­lion credit cards by the end of 2015, fall­ing 5.05 per­cent from the pre­vi­ous year. It was the first drop in credit card is­suance since 2008.

A banker at the credit card cen­ter of a na­tional joint-eq­uity com­mer­cial bank, who de­clined to be named, said: “We have felt ris­ing pres­sure from large in­ter­net com­pa­nies since they be­gan to of­fer their own pay­ment ser­vices.”

Ant Check Later, a con­sumer credit prod­uct launched by the fi­nan­cial arm of Chi­nese e-com­merce gi­ant Alibaba Group Hold­ing Ltd, has dif­fer­ent lines of credit rang­ing from 500 yuan to 50,000 yuan with an in­ter­est-free pe­riod of up to 41 days.

The clients may choose to make pay­ments through an in­stall­ment plan at three­month, six-month, ninemonth or 12-month in­ter­vals at an in­ter­est rate vary­ing from 2.5 per­cent to 8.8 per­cent.

The prod­uct cov­ers a fairly large num­ber of con­sumers who were not reached by tra­di­tional fi­nan­cial in­sti­tu­tions. More than 60 per­cent of its clients had never used credit cards be­fore.

Com­pared to credit cards, Ant Check Later is more at­trac­tive to younger peo­ple. About 48 per­cent of its clients were born in the 1980s and 33 per­cent in the 1990s, ac­cord­ing to data it re­leased in Novem­ber 2015.

GEO Tech­nolo­gies Ltd, a Bei­jing-based­big­data­so­lu­tion­provider, said in a re­port in June: “Con­sumer fi­nan­cial prod­ucts like Ant Check Later have vi­tal­ity. They are well-re­ceived by a wide range of clients be­cause they of­fer a small amount of credit to grass-root con­sumers on an un­se­cured ba­sis.”

E-com­merce gi­ants have uniquead­van­ta­gesin­con­sumer fi­nance be­cause they have ac­cu­mu­lated a large num­ber of ac­tive users and have cre­ated a vast lay­out in var­i­ous ser­vice sce­nar­ios. They al­soown­tons of trans­ac­tion data. This leads to more ac­cu­rate client-risk as­sess­ments at lower costs, the re­port said.

An­a­lysts ex­pect that con­sumer fi­nance will in­te­grate deeply with the in­ter­net, from prod­ucts and ser­vices to risk man­age­ment.

An ear­lier GEO re­port found that dur­ing the first quar­ter of 2016, nearly 47 per­cent of an ef­fec­tive sam­ple of more than 5 mil­lion cred­it­card hold­ers also used Ali­pay, a third-party on­line pay­ment plat­form launched by Alibaba. It re­vealed a clear trend of in­te­gra­tion of mo­bile in­ter­net and fi­nance, which has driven the launch of cloud-based pay­ment so­lu­tions by ma­jor com­mer­cial lenders.

Ling Hua­nian, from the credit-card cen­ter of China Guangfa Bank Co Ltd, said that com­pe­ti­tion from in­ter­net com­pa­nies is forc­ing the tra­di­tional credit card sec­tor to in­no­vate by adopt­ing iden­ti­fi­ca­tion tech­nolo­gies to re­duce pro­cess­ing time for card is­suance.

Cur­rently, sev­eral banks in­clud­ing China Guangfa Bank, China CITIC Bank Corp Ltd and China Ever­bright Bank Co Ltd have launched in­stant on­line card-is­su­ing ser­vices. Com­mer­cial banks are also using mo­bile phones and hand-held per­sonal com­put­ers to ac­quire cus­tomers on­line and im­prove the ef­fi­ciency of the credit-card ap­pli­ca­tion process.

The credit-card sec­tor is putting a greater em­pha­sis on qual­ity rather than sheer num­bers, Ling says.

Ma­jor com­mer­cial banks fight­ing to op­ti­mize the cus­tomer ex­pe­ri­ence and in­crease cus­tomer loy­alty are using new bat­tle­grounds through the es­tab­lish­ment of big data plat­forms, the use of cloud computing, and the in­tro­duc­tion of probe tech­nol­ogy, he added.

PHO­TOS PRO­VIDED TO CHINA DAILY

China’s ma­jor e-com­merce player JD.com Inc pro­motes its on­line in­vest­ment prod­ucts dur­ing an event in Nan­jing, Jiangsu prov­ince.

A vis­i­tor re­views a va­ri­ety of con­sumer credit prod­ucts dur­ing an e-com­merce expo in Bei­jing.

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