Internet Business Thinking

Chapter 22 Online Lending: Ending the Lending Crisis?Financial Age Revolutionary? (4)
The basic loan financial institutions in the United States include commercial banks, savings and loan associations, savings banks, and credit unions. In addition, there are various securities institutions that support agriculture, water conservancy, housing, and student loans. They use securitization tools in Financing in the market, and then providing funds to government projects, home buyers, students, etc., such as several large housing mortgage financing institutions such as Freddie Mac, Fannie Mae, and Xueli Mae.It can be said that the US financial market has formed a complete two-level market of deposits and loans and loan-backed securities (ABS), providing smooth financial support for economic operations.

American P2P online lending was born under such a perfect market background.Therefore, the United States does not regard it as a new non-financial thing, but a "bank-like" financial institution.And because its loans are sold in the form of shares, in terms of operation, it has the characteristics of securities, so as early as 2008, the US Securities and Exchange Commission (SEC) put forward regulatory requirements for it.Although there are still legal disputes over the SEC's supervision, in fact, the supervision has made the P2P platform in the United States break away from the simple "loan collection-granting" model, and has been incorporated into the two-level structure of standardized loans and loan securitization.

In my country, P2P online lending is more like a low-cost Internet company, and anyone can do it.In addition, there is no rigid constraint on registered capital for P2P online lending, no identification of the qualifications of practitioners, and even a template of an online software platform can be purchased for only a few thousand dollars. In this case, the central bank is a non-banking company. The reason for the banking business is to supervise it and prohibit it from engaging in illegal fund-raising business.

Positioning and supervision have their own positions

In the United States, the Federal Reserve does not exercise the central bank's supervisory function on P2P online lending.Because banks registered in each state of the United States may not join the Federal Reserve System or the State Federal Reserve System.This means that in the United States, there are no so-called bank license and access issues.There are more than 7000 commercial banks in the United States, a quarter of which are registered with the Federal Reserve and regulated by the Federal Reserve. Most of the banks are state banks and are not members of the Federal Reserve.In this sense, establishing a bank in the United States is more like establishing an ordinary company, and does not require a license issued by a certain government department.

At present, there are more than a thousand online credit platforms in my country. Correspondingly, by the end of 2011, there were 2 policy banks and my country Development Bank, 5 large state-owned commercial banks, 12 joint-stock commercial banks, and 144 city commercial banks in China. , 212 rural commercial banks.Previously, my country's loan market was mainly composed of banks and private lending markets.The latter is characterized by huge risks and usury for both borrowers and lenders, which belongs to the gray area.Since the loan market is monopolized by a system mainly composed of state-owned banks, the private sector's demand for loans has been unmet for a long time.The emergence of online credit just makes up for the intermediate structure of these two markets, providing a source of funds that is more active than banking institutions, abundant in short-term small funds, and convenient in loan procedures, and more standardized, transparent, and secure than private markets.From the perspective of its lending relationship, whether it is charging intermediary fees or earning interest spreads, it is not an equity investment, which is not fundamentally different from a bank.However, my country's lending market has not allowed other institutions to enter. On the contrary, the equity investment market and private equity investment are very active.

From the above comparison, we can see an interesting phenomenon. The United States has relaxed the entry threshold for banks, positioning P2P online lending as a "bank-like" financial institution, and strictly supervised by the securities regulatory department.In my country, however, the entry threshold for banks is strict, and P2P online lending is excluded from banks. However, the central bank prohibits it from approaching banks' illegal deposit-absorbing business, making it still in the state of a general Internet enterprise with a financial color among the people.

Acceptance of the financial system is controversial

P2P online lending in the United States has formed a complete industrial chain and has been successfully embedded in the original financial system.

Take Lending Club, the largest P2P platform in the United States, as an example.The borrower submits a loan application on Lending Club, and Lending Club publishes the loan items of the borrower who meet the credit rating on the Internet according to the credit evaluation of the borrower by the credit bureau.Lenders choose to invest according to their own investment wishes according to the project information published by Lending Club.

However, the investment behavior is neither direct investment by the lender nor investment to the borrower through Lending Club, but a loan to the borrower by WebBank, a state bank registered in Utah that can issue loans to residents across the United States.The bank sells the creditor's rights to Lending Club, that is, the latter purchases the bank's loan, and then Lending Club issues a proceeds certificate based on the loan. This process realizes the securitization of the loan; the lender purchases the proceeds certificate, which is equivalent to a first-level market.

Lending Club is a pure transaction-matching intermediary platform, and has always adhered to the principle of no deposit, no lending, and no guarantee.Therefore, the lender is an unsecured creditor of Lending Club, and the risks it faces need to be resolved by selling the creditor's rights in the secondary market.

Lending Club has teamed up with Foliofn, an innovative discount broker, to offer users an online debt trading platform.The lender sells the overdue creditor's rights on the basis of this discount, and the professional investors purchase the overdue creditor's rights to make a profit by acquiring bad debts.

In the above-mentioned value chain, institutions at all levels try to disperse income and power as much as possible, and transfer risks. Such a market structure is not fundamentally different from traditional markets.Borrowers and lenders are "disintermediated", and there is no difference whether the lender is an individual investor or an institutional investor. Therefore, all P2P platforms in the United States have attracted a large number of institutional investors.

Compared with the situation in the U.S. market, my country does not have a complete credit investigation system and cannot provide credible and commercial third-party credit evaluations. P2P companies are forced to conduct offline loan approval, or cooperate with specialized microfinance companies to expand projects sources, or cooperate with guarantee companies to avoid project risks.

In addition, the transfer mechanism of non-performing creditor's rights is not perfect, and the risk of the lender is still difficult to guarantee.The asset securitization market is not perfect, and it is difficult to establish a good cooperative relationship between online lending platforms and banks. In addition, the establishment of a free fund pool makes it difficult to avoid the risk of illegally absorbing public deposits.In general, the value chain is relatively simple, and risks are not as dispersed as possible.

Loan interest rate marketization is different

The developed US loan market and perfect credit system make it easy for lenders to obtain funds from financial institutions.In the process of asset securitization, borrowers with poor credit quality can also go to the market for loan financing through credit grading and credit enhancement tools.Therefore, the birth of P2P online lending is essentially the innovation of financial tools, which facilitates the process of financial transactions. As Chris Larsen, the founder of Prosper, the second largest P2P platform in the United States, said: "Promote the democratization of the lending process." Its customers The group is also traditional customers, whose loan interest rate is lower than the traditional loan interest rate (bank or credit card), but the deviation is not large.

As mentioned above, my country's P2P online lending is an intermediate form between banks and private credit, mainly for an estimated 5 million non-credit card Internet users, and about 4400 million small and micro enterprises that cannot obtain loans from banks.The cost of issuing such small loans is relatively high, including the cost of offline loan review due to the inability to obtain third-party credit evaluation, coupled with the characteristics of small and micro enterprises in the loan customer group, and the low credit quality of non-credit card Internet users, making repayment Increased payment risk.The current situation of high cost and risk will undoubtedly cause its loan interest rate to be much higher than the bank loan interest rate.

According to the data compiled by Wangdaijia and Guosen Securities, in September 2012, Renrendai’s annualized rate of return was 9%, Hongling Venture Capital’s annualized rate of return was 11.85%, and 11.14 Yidai’s annualized rate of return It is 365%, the annualized rate of return of 22.28 credit is 808%, the annualized rate of return of e-speed loan is 24.99%, the annualized rate of return of Wenzhou loan is 19.41%, and other small-scale platforms even give an annualized rate of 11.71%. rate of return.If such a rate of return is real, then P30P online lending will quickly open up a gap with the current annualized rate of return of 2% to 4% for various funds (including Yu'e Bao).If this situation continues, P7P loan interest rates are accepted and made public by the market, and a dual-track interest rate system or the so-called black market of interest rates will inevitably form, resulting in arbitrage behavior between banks and P2P platforms, which will affect the banking environment.In fact, the impact of financial disintermediation on the banking industry is also a very controversial topic in developed countries.

Serious differentiation of value orientation
P2P online lending platforms in the United States are not all for profit. Generally speaking, non-profit platforms and for-profit platforms keep pace with each other, collecting interest-free funds from lenders, solving poverty problems through interest-free loans, and supporting private individuals in developing countries. Venture Project.According to the latest data on its website, the total loan amount has exceeded 5 million US dollars, and 73 million people in 118 countries have obtained about 64 interest-free loans, with an average loan of 411 US dollars per person. The lender can provide a minimum of 25 US dollars. Implemented the idea that everyone can do charity.

In my country, P2P online lending is mostly based on commercial interests. The creators of P2P websites have discovered a new business model with promising prospects; the main purpose of the lender is to increase personal or business operating capital, short-term financing needs, and investment purposes such as term capital allocation. It is impossible to expand at a relatively high cost Financing channels from banks; lenders are mostly looking for higher-yield idle funds and more reasonable returns than in the private lending market under the circumstances of industrial investment, stock market investment downturn, and real estate investment risk increasing in recent years.

Six years have passed since the development of P2P online lending. my country still has not clarified its industry positioning, minimum registration mechanism, credit system requirements, relationship with the financial system, and employment requirements.If it is allowed to develop like this, there will inevitably be greater risks.

(Section [-]) Breaking through the monopoly of giants - the opportunity of vertical Internet finance

Compared with the Internet financial platforms of major giants, the vertical industry Internet financial products that Sina Leju is trying may be another way of thinking.For vertical Internet finance, as long as the two problems of the credit review system and unique financial products that meet the needs of industry users are well resolved, success is possible.

Alibaba's microfinance service has really made Internet finance popular.Subsequently, major e-commerce giants followed suit and entered the field of Internet finance.Through careful research, we can find that e-commerce and Internet finance do have a natural fit. They both involve capital transactions, and the capital flow and data flow generated by e-commerce can just serve as the supporting foundation of the Internet financial platform.

Vertical Opportunities of Internet Finance
There are many types of Internet financial products, some of which are purely P2P platforms, some of which are crowdfunding and supply chain finance.However, these models can be divided into two categories: one is a pure Internet financial platform, which uses financial services as the entry point, and does not combine with existing businesses, existing fields, and existing consumption processes; the other is related to vertical fields Combined vertical Internet finance.

For companies like Sina Leju, which are at the forefront of subdivided industries but do not have the strength of BAT (abbreviation for Baidu, Alibaba, and Tencent), vertical Internet financial products are another opportunity.

At the end of 2013, Sina Leju launched the Lejudai product, which is also an attempt by Sina to develop Internet financial products in the vertical real estate industry.Cui Xinglong, vice president of E-House China and CTO of Leju Internet and E-commerce Group, believes: "Companies that make vertical Internet financial products are basically companies that are at the forefront in their respective fields, regardless of user accumulation, financial strength and various resources. In terms of reserves, they are all very advantageous. The most important thing is that they can be integrated with their own related products, such as the integration of Leju’s real estate e-commerce and Lejudai. For example, some automobile websites and travel websites can integrate Combining some of my own O2O sales models with Internet finance and even Internet insurance has advantages, because customers have already provided them with security, convenience, and cost-effective financial products in their own product service system. High-quality products are a matter of course."

From E-commerce to Vertical Internet Finance

On November 2013, 11, E-House China announced that it had reached a strategic cooperation with China CITIC Bank, obtained a cooperation scale of 12 billion yuan of intention, and launched "Lejudai", users can help consumers solve their consumption funds through the form of real estate mortgage comprehensive credit question.Through Lejudai, users can use housing mortgages to apply for comprehensive credit from China CITIC Bank. China CITIC Bank can grant up to 500% of the mortgaged house value, and the loan period can be up to 90 years. It is one of the few credit products that pre-approves the credit approval process. The "Leju Loan" quota can be used to meet the needs of individuals and families in purchasing houses, cars, decoration, studying abroad, traveling, household consumption, weddings and other large-scale consumption needs.

In fact, since 2011, Leju has launched Internet sales products for real estate e-commerce, from the earliest auction model, E-gold coupon model, super E-gold coupon model, and gradually developed to the current Lejudai.From the stage of media event marketing to advocate effect-based and channel-based real estate marketing, to the stage of channel marketing to establish the O2O long-term customer accumulation model, and then to the platform-based service stage to completely separate platforms and services, return marketing autonomy to developers, and now Sina Leju has been trying to connect the process of users buying houses with the process of developers selling houses, which not only brings actual benefits to consumers, but also solves the problem of real estate sales for developers.

For Sina Leju, because real estate is a bulk commodity transaction, the amount of transactions facilitated through it is huge.As of September 2013, 9, Leju Real Estate e-commerce has processed a total of 30 house purchase orders online, with a total of 34.5 houses traded, and a cumulative transaction volume of more than 116095 billion yuan.If the more than 1257 billion yuan is provided by Leju to users in the form of Internet financial products, the profits will be unimaginable.

From this point of view, it is reasonable for Sina Leju to launch Internet financial products.As Cui Xinglong said: "Whether it is the users accumulated by new house sales agents, the data accumulated by providing consulting services for developers, or the precise customers accumulated by Leju Internet 400 per day, house viewing groups, and second-hand house products. They will all When we need financial products, we communicate with customers to find out where they fit in with Lejudai. Lejudai and banks are already a standard financial service package, which can easily realize the integration of data flow and capital flow. "

Two elements of vertical Internet finance

For vertical Internet finance, as long as two problems are solved, it is possible to succeed: one is to use the audit system; the other is to provide unique financial products that meet the needs of industry users.

The logic of Leju lies in: buying a house is a rigid demand, but it does not mean that the person who buys a house does not own a house.For example, young people who develop from second- and third-tier cities to first-tier cities need to buy houses in places like Beijing, Shanghai, and Guangzhou, but most of them have houses in their hometowns; as for young people who grew up in big cities like Beijing, Shanghai, and Guangzhou, Their parents own at least one house.Since these people with rigid needs all own houses, the most troublesome credit review problem in the field of Internet finance can be easily solved. At least for Leju’s vertical Internet financial products in the real estate industry, these houses are the best credit guarantee .

For the Internet finance industry, after having a credible credit review mechanism, unique financial products are also needed.

The loan interest rate of Leju Loan is 20% higher, which is about equal to the loan interest rate of a house. So at the current stage—the period when Internet companies are shopping for income and prices, Leju has no interest rate advantage compared with loans provided by ordinary banks. Loan, where is the advantage?
The answer is: Lejudai can effectively solve the problem of the shortfall of down payment funds when buying a house—the difficulty of getting a loan.For current home buyers, banks can certainly provide follow-up loans, but they don't care about the down payment.Therefore, for most working-class home buyers, the down payment for home purchase is an unmet need.Cui Xinglong said: "Consumers have a certain capital flow cycle from selling old houses to buying new ones, and in this cycle, consumers usually use the way of selling old houses to complete. In this process, consumers have a certain time cost. and capital costs, Lejudai is a product based on this demand of users, without selling old houses, and directly using loans to make up the down payment.”

(End of this chapter)