The World’s Largest P2P Lending Company You’ve Never Heard Of
[This is the first in a two part series on the Chinese p2p lending market. Tomorrow we will bring you an exclusive interview with a senior executive at the world’s largest p2p lender.]
Quick quiz, what is the biggest e-commerce company in the world? Amazon? eBay? Wrong. It’s the Alibaba group in China, which is much bigger than Amazon and eBay combined. In fact, Alibaba just did $5.75 billion in sales in one day last month. To put this into perspective, this article from USA Today noted all US companies (Amazon, eBay, Walmart.com, Bestbuy.com, etc.) on Cyber Monday this year achieved sales of $2.29 billion. Yes, Alibaba (and China) is that big.
Ok, second quiz, what is the biggest p2p lending company in the world? I think you know where I’m coming from, but if you’re guessing Lending Club, you’re wrong (even though I’ve said that many times). Presentation of China CreditEasethe largest p2p lending company in the world’s largest p2p lending market.
A massive market
Before diving into CreditEase, let’s take a look at China’s massive p2p lending market. After doing some research on the Chinese market, the first thing I have to say is that nobody knows exactly how big the market is, but everyone agrees that it is HUGE. The general consensus is that there are over 2,000 p2p lending companies in China (see here and here) and they are classified in China’s shadow banking economy, which is estimated at 22 trillion yuan or US$3.6 trillion according to Credit Suisse. According to Caixin Online, citing a report published by the People’s Bank of China (the Chinese equivalent of the Federal Reserve), China’s p2p lending market is worth 60 billion yuan, which is equivalent to 9.8 billion US dollars! If you dig deeper, research firm Celent Research recently released a report that estimates the online p2p market is born. $940 million in 2012 and expected to reach $7.8 billion by 2015.
So why is p2p so prevalent in China? For starters, the Chinese practice of lending money to a family member or friend is as old as time. However, from what I can gather, China lacks a robust banking system, which has made p2p a major source of consumer lending for decades. Thus, China’s shadow banking economy is extremely significant and p2p is a very important component.
P2P lending became mainstream as investors moved their money from bank accounts to p2p in search of yield under the guidance of their wealth managers. Caixin Online quoted a report that said that 55 percent of respondents surveyed (most of whom were p2p investors) said they invested more than half of their money in p2p lending, while 34% said p2p lending represents more than 80% of their investment. And a report from National Business Daily and wangdaizhijia.com revealed that 60% of all p2p lenders earn less than 100,000 yuan (about $16,000) per year. At CreditEase, however, they say their investors are better off than average with a typical investment of over 200,000 yuan ($32,000).
CreditEase is the largest p2p lending platform in China and has issued over $3.2 billion (20 billion yuan) in loans to over 500,000 borrowers, growing around 200% annually. The company was founded by Tang Ning in Beijing in 2006 and currently has over 20,000 employees in 150 cities. It has grown from a simple P2P lender to a full-service wealth management company with a range of asset allocation and insurance products for its investors.
Because personal credit history is so limited, CreditEase has a size and history advantage given its own history. The company has designed a proprietary credit underwriting system that leverages its historical loan portfolio to better understand what works and what doesn’t. This expertise allows CreditEase to think of the market more broadly than some of its peers. CreditEase will consider anyone with a business idea that has been overlooked by banks. When Mr. Ning thinks about the size of his market, he Recount the Financial Times that “there are around 60 million micro-entrepreneurs in cities and 200 million poor people in rural areas, so this is a huge market opportunity”. Moreover, he Recount the South China Morning Post that “[we are still in] our initial step to tap into the huge market, which is worth more than one trillion yuan ($164 billion). If Mr. Ning is correct, we are only scratching the surface of what is possible in China.
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Peter Renton is President and Co-Founder of LendIt Fintech, the world’s first and largest fintech-focused digital media and events company. Peter has been writing about fintech since 2010 and is the author and creator of the Fintech One-on-One Podcast, the first and longest running fintech interview series. Peter has been interviewed by The Wall Street Journal, Bloomberg, New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, Financial Times and dozens of other publications.