Largest P2P Lending Market in the World
Fintech is a hot topic around the globe and China is no exception. The Chinese peer-to-peer lending market is the largest in the world exceeding $150 Billion in 2015. The 2,595 Chinese P2P lending platforms, counted at the end of 2015, have cumulatively brokered 1.37 trillion yuan according to a report in China News (http://www.ecns.cn/business/2016/01-02/194408.shtml). These numbers are particularly significant since they came from true peers, small investors with little institutional money powering the sector.
Challenges of Skyrocketing Growth
Although P2P lending in the US is heavily regulated, Chinese platforms operated without regulatory safeguards until 2016. This unregulated environment fueled growth but also resulted in a significant number of failed platforms (896 in 2015) and in some less than credible platforms defrauding unwary investors.
Another issue facing the industry is the lack of credit reporting agencies and FICO scores that exist in developed markets like the US. According to PIIE (Petereson Institute for International Economics) Chinese lending platforms use alternative approaches such as reviewing bank statements to identify sources of borrowing that don’t turn up in credit records, verifying whether or not a borrower pays his or her phone bill, and in some cases, platforms even send employees to check on physical assets in person.
Decision Management Addresses Challenges of P2P Platforms
Recently Jin Xu, from Sparkling Logic’s Chinese partner, Xinshu Credit, presented at the Global Internet Finance Summit 2016 in Shanghai. Jin Xu discussed some of the challenges faced by P2P lending companies and how Sparkling Logic helps companies, such as Weshare Finance, address these challenges:
- Labor costs, especially for IT engineers, are rising in China. Decision management platforms, like SMARTS Decision Manager, reduce development time and time to market when compared to traditional systems developed using code.
- SMARTS enables business and risk analysts to manage lending decisions with minimal IT support, resulting in a less costly, more agile solution.
- As new fraud schemes continuously arise, SMARTS allows companies to rapidly respond in implementing fraud prevention measures.
- Most P2P lenders require external data to evaluate risk. SMARTS enables the implementation of pre-screening rules to avoid requesting unnecessary and costly external data for ineligible borrowers.
- As data accumulates, SMARTS predictive analytics capability allows companies to extract knowledge from historical data to improve lending decisions.
Weshare Finance, a leading Chinese FinTech company, recently selected SMARTS to revamp its loan processing system. WeShare Finance was founded in March 2014 and is a standing council member of the Association of Internet Finance China. Weshare focuses on providing and cash and installment services to individuals with the motto “mobile inclusive makes life better”. Within 60 seconds Weshare Finance can make a remiitance into a user’s bank account, and is called the handheld ATM of young people.
Learn more about Decision Management and Sparkling Logic’s SMARTS™ Data-Powered Decision Manager