Exclusive: Ant Group restructures Huabei’s consumer lending business

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The Chinese fintech giant Ant Group Co. Ltd. will begin to separate its consumer brand Huabei (花 呗) from lending services provided by partners on its platform, as it did with the sister brand Jiebei (借 呗), Caixin learned.

The reshuffle is part of a larger overhaul that Ant Group, owned by Jack Ma, has pledged to comply with stricter regulatory requirements for financial technology platforms since authorities abruptly halted the Sale of shares of $ 34.5 billion plan a year ago.

Ant Group’s colossal consumer credit business through its signature loan products, which generated the majority of the company’s revenue, was at the heart of the overhaul. Through Huabei and Jiebei, Ant granted 1.7 trillion yuan ($ 266 billion) in consumer microloans to 500 million people last June. Huabei contributed 4 billion yuan in revenue to Ant Group in 2020, according to a report by Zhongtai Securities Co.

Previously, Ant Group matched users in Huabei and Jiebei with banks that provided credit while reducing fees. This model raised concerns about the potential risks posed to the financial system, as banks had to bear most of the credit risk and some of them did not fulfill their risk control responsibilities, according to the reports. regulators.

In a February notice, the China Banking and Insurance Regulatory Commission set an overall limit on online loans issued by banks in cooperation with third parties as a percentage of their total credit and set limits on their total exposure to loans. joint loans. He also demanded that in any joint loan, the partners of the banks must bring at least 30% of the capital.

Leading financial regulators have asked Ant to focus on its role as a payment service provider by removing financial products from its platform and decoupling them from Alipay’s payment infrastructure. They also banned Ant from allowing other financial institutions to issue loans through Jiebei and Huabei.

Huabei, which means “just to spend,” works like a virtual credit card that people can use to make purchases online and in stores. Jiebei, which means “just borrow,” provides unsecured loans for up to 12 months which are usually paid off in installments. Jiebei is designed for larger consumer transactions by users who have already developed a credit history on Ant’s platform or who are eligible for Huabei, according to Ant’s initial public offering prospectus.

Ants new consumer credit unit, Chongqing Ant Consumer Finance Co. Ltd., will continue to provide consumer credit services under the Huabei brand, but consumer loans issued by its partners will be provided under a new category called Xinyonggou (信用 购), according to reports. people familiar with the matter.

Earlier this month, Ant said it was abandoning the Jiebei brand of partner-provided lending services on its platform to differentiate them from its own financial services. Loans issued by partners will use the Xinyongdai (信用 贷) brand, while those issued by Ant will remain under its Jiebei brand.

After the reshuffle, the credit products displayed in users’ Alipay accounts will have five categories: petty cash, Huabei, Xinyonggou, Jiebei and Xinyongdai. Petty cash is typically a 500 yuan interest-free loan that borrowers have to repay within seven days.

Some Huabei users said they found that their borrowing limits were reduced by a few thousand yuan. One user said his quota had been reduced to 1,000 yuan from 38,000 yuan, Caixin learned. But some Huabei users with excellent credit histories said their quotas had not changed.

In September, Ant Group said its own private credit scoring system would be connected to the central bank’s financial credit information database. Ant Group will lower borrowing limits for over-indebted users after accessing the central bank’s credit database. Those who do not allow credit data sharing with the central bank will not be able to use Huabei’s service, a person close to Ant told Caixin.

At present, Chongqing Ant Consumer Finance can provide limited funds on its own, the person said. Before the reshuffle, he considered several options. One was to reduce borrowing quotas for existing Huabei users while providing them with Xinyonggou accounts, the person said.

Huabei currently has around 500 million users with fixed consumption scenarios, which are considered the best quality of credit assets, the person said. Ant Group could risk losing some users by lowering its limits, the person predicted.

Another option was to provide Huabei only to part of Ant’s user group while completely turning the rest to Xinyonggou, the person said. However, it is about choosing which users, those with better or worse credit histories, to hand over to banks and other financial institutions. If Ant chooses to push customers with poorer credit to banks, they might not be able to get loans from banks and Ant would end up losing users as well, the person said.

The final plan seeks to strike a balance between several options, while Ant Consumer Finance also faces an imminent need to increase its own capital, the person said.

Ant has also significantly reduced the credit available to some Jiebei users. For example, the initial maximum cash withdrawal limit of 300,000 yuan has been halved and needs to be divided into multiple withdrawals.

Contact journalist Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bonjour@caixin.com)

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