On 7 November, Alipay renamed its online loan product 借呗(Jie Bei) to 信用贷 (Credit Loan) and prominently stated the names of the loan providers. These were responses to an earlier restructure order made by Chinese regulators this April, asking Ant Group to “cut off” the “improper connections” between its online payment platform and its lending products.
At the start of the year, China started a tough campaign to strengthen financial regulation and crackdown on anti-competitive practices by internet-finance titans. Ant Group, the sister company of the e-commerce giant Alibaba, has been put in the crosshairs, for having over 500 million users and lending over 2.15 trillion RMB ($3400 billion) by 30 June 2020.
Chinese people access Ant’s lending products, Hua Bei and Jie Bei, on the Alipay platform in order to get a loan of from 3,000 RMB ($469.3) up to 300,000 RMB ($46,930). However, the loan provider is not always Ant Group but also includes around 100 banks that were not disclosed as other loaning sources.
Before yesterday, all lending businesses on Alipay were attributed to either Hua Bei or Jie Bei, while the specific information of the lender was not clearly provided. But now, things are different – Jie Bei only refers to loans provided by Ant Group, distinguished from that offered by other financial institutions.
This move is to keep the borrowers informed and ensure multiple options when it comes to borrowing money. It will be interesting to see how this affects Alipay’s loaning site, whether a degree of trust will disappear with this new knowledge or whether it will remain unchanged.
One thing is for sure, consumers will be more well informed in making these sorts of decisions and the Chinese government will make sure they have that protection.
Jie Bei (now Credit Loan) was launched on Alibaba-backed Alipay in 2015, providing unsecured cash loans and successfully entered the market, generating 49.4 billion RMB ($7.73 billion) for 30 million borrowers within one year.
This online product evaluates people’s borrowing capacity, based on their consuming records on Alipay and allows instant loans within just 10 minutes. These quick and easy loan structures have obviously brought in customers, with easy ways to loan needed money, but there are potential dangers to such easy access and it is thought the new Chinese regulations will help with this issue.
Ant Group’s lending products are now widely used by young people in China, who usually don’t have a stable income or sufficient knowledge in online finance to protect themselves. That’s where the government steps in, and presumably, this will be the first of many changes to come for Ant Group.
This new policy will protect those from dangerous loans that can see interest build dramatically and fairly quickly, leaving people with crippling debts for potentially their lifetime. We can see this will have a clear commercial impact on Ant Group, but it also warns of changes for the further loan economy, where we can imagine as it becomes more widespread all businesses involved will become affected.