Online lender seeks small-scale borrowers

money-glitz | Samantha Wong 25 Jun 2018

China's FinUp Finance Technology Group, which operates a technology-enabled finance platform with a focus on marketplace lending, aims to widen its market in the country by going public in Hong Kong.

The fintech firm also provides a variety of other personal credit services including point of sale instalment services to automobile financing services.

It plans to use the IPO proceeds to fund personal credit services to its borrowers, according to a filing to the stock exchange. Proceeds will also be used for improving technology infrastructure and talent.

FinUp Finance booked financial losses in 2015 and 2016 due mainly to fair value losses and loss on disposal of subsidiaries.

FinUp Finance generates revenue mainly from fees charged to borrowers and investors.

With the increasing popularity of online consumer finance service providers, it is likely that the Chinese government will seek to further regulate the industry.

For example, the guidelines to promote the healthy growth of internet finance in 2015, prohibit these providers from including "credit enhancement services."

But FinUp Finance says that the guidelines are not clearly defined and yet warns that its business might be at risk if it fails to obtain necessary licenses and permits from the central government regulators.

The company ranks fourth in terms of the outstanding balance of loans facilitated in China as of the end of last year, with a market share of about 2.6 percent, according to a report by managing consultancy Oliver Wyman.

Its transaction volume ranked the third in the country, with a market share of 2.4 percent.

Founded in 2013, the company cautions that the transactions volume might not grow on the platform considering its limited operation history.

The major group of customers is aged below 35.

The firm seeks to lure customers who are underserved by traditional financial institutions.

As of end last year, client assets amounted to 32.7 billion yuan, (HK$39.85 billion) of which 75.5 percent of its active investors had invested assets of 50,000 yuan and below.

FinUp Finance Technology acquires and collects borrower data from both online and office channels.

It has a network of 208 offline locations in 165 cities in 26 provinces, to be able to offer financial services to individuals who are not frequent users of the internet or smartphones.

As for its personal credit services, the company provided 51 billion yuan of loans or financing loans to about 900,000 borrowers. The average contract amount was 37,000 yuan over an average 32- month loan agreement.

About two-thirds of the active borrowers were under 35 years. They contributed 63 percent of the total outstanding balance of loans that the firm facilitated.

FinUp Finance says it has established an integrated risk and credit assessment system with which to "effectively detect" potential fraud.

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