The author | hong seven
| laser sources of finance and economics (ID: leishecaijing)
Consumer finance firms have had a mixed start to the second decade. On the one hand, industry risk clearing, regulatory release policy dividend, head institutions stable performance and open IPO boom; On the other hand, the industry interest rate is falling, and the high-risk model covered by high interest rate cannot be maintained. In the limited pricing space, customers are moving up one after another, and the internal and external competition pressure is multiplying.
Since last year, regulatory policies and industry trends have accelerated the restructuring of the consumer finance market pattern, filling in the regulatory gaps at the asset and capital ends, and consumer finance has returned to its roots. At this changing point, licensed consumer finance companies, which take into account license, consumption and technology attributes, gradually become the mainstream.
Among all kinds of consumer finance subjects, licensed consumer finance companies, as a new form of financial industry, have become the main force of resource allocation in the consumer finance field based on license advantages and digital technology capabilities after ten years of market experience. Among them, licensed consumer finance companies represented by Zhaolian, Industrial and Instant Consumer Finance are playing an increasingly prominent role in the consumer finance market.
The return of consumer financial services to the licensed exhibition industry also faces the competition situation of falling interest rates, rising endogenous risks and the influx of giants. Compared with the field of horse racing in the first half, consumer finance companies need to think about how to build an advantage in assets and liabilities under the environment of rational competition in the industry, and operate the cultivation stock market with refined technology ecology.
In terms of the current market situation, capital has gradually turned its attention to the virtuous cycle of capital and assets, and consumer finance companies with prominent scientific and technological attributes, which also means that institutions with benign ecology will usher in a revaluation of value. At present, the licensed consumer finance industry has announced listing plans, such as Zhaolian, Jiimai, Zhongyuan, etc. Through the business of these institutions, we can find that the foundation of listing comes from sustainable profitability and leading technology and financial ecology of the industry.
If consumer finance companies want to break out in the new competitive landscape, they must adhere to long-term principles. Only by improving the quality and efficiency of financial services through science and technology and constructing the value cycle of assets can stable performance be maintained. This, of course, is what a successful financial firm must do to navigate the cycle.
01
Landscape remaking
Consumer finance is the product of the open innovation of information technology and financial industry. With the outbreak of Internet finance in 2013, consumer finance companies, online small loan companies, Internet financial institutions and other consumer finance suppliers have participated in the allocation of consumer finance resources. However, these new financial forms, which have not experienced a complete economic cycle, blindly pursue scale in the process of industry expansion, resulting in a surge of risks.
In essence, the foothold of any financial form of Tech is always Fin. Financial industry itself has strong correlation with the economic cycle, time through the influence of the periodic law, because of the Internet finance, finance, science and technology development time is shorter, there must be missing data and model and risk, if not financial and effective separation technology, financial service system based on digital could enlarge the financial risk of infectious.
Starting from the rectification of cash loans in 2017, the regulation gradually tightened the risk exposure of Internet finance, and then the risk control and collection of big data in the Internet loan industry chain were also put into the cage of the system. In the past two years, regulators have begun to address the risks of fintech, especially last year to strengthen the management of fintech institutions represented by Ant Group.
Consumer financial services have moved from offline to online, and supervision has gradually guided various subjects to maintain a dynamic balance between leverage and risk. From the perspective of participants in the consumer financial industry chain, supervision focuses on strengthening management of non-licensed institutions and regulating Internet business cooperation between licensed institutions and third-party institutions.
A series of regulatory actions show that the consumer financial market has transitioned from the pioneer era to the mature stage, risks are gradually cleared under the increasingly perfect regulatory system, and the industry tends to develop in a healthy and orderly way. This also provides a more stable market environment for licensed financial institutions to expand their business.
As far as licensed consumer finance companies are concerned, the expansion and growth curve is just climbing upward along the trend of Internet finance. They once carried out crazy enclosure movement from offline to online, and then transitioned to rational stage in a strongly regulated market environment.
According to data collected by the Consumer Finance Committee of the China Banking Association, the growth rate of the asset scale and loan balance of consumer finance companies has decreased significantly since 2018, which signals that the licensed consumer finance market is shifting from incremental to inventory. Nowadays, compliance exhibition industry has become the first priority of consumer financial institutions. Forced by factors such as blocked customer acquisition, limited pricing, flood of homogeneous products and high credit risks, a pattern with licensed institutions as the core is being reconstructed.
02
A virtuous cycle
In a more rational stock state, it is very important for consumer finance companies to have a business model of sustainable growth, which can on the one hand resist the impact of outbreaks, and on the other hand flexibly cope with the risks of peer competition and periodic fluctuations.
Looking back on past performance, it is not difficult to see that generally consumer finance companies with fluctuating performance are very vulnerable, especially in the face of uncertain factors such as the epidemic, revenue, profit and asset quality are not optimistic. At present, zhaomin, Industrial, instant consumer finance and other leading institutions have disclosed their performance in 2020. Despite the impact of the epidemic, these institutions still maintain stable growth in revenue, profits and assets, which also proves that the head institutions have formed a virtuous cycle of capital and assets.
Data show that from 2016 to 2020, ZHAolin achieved revenue of 1.191 billion yuan, 4.163 billion yuan, 6.956 billion yuan, 10.740 billion yuan and 12.816 billion yuan respectively, with revenue growth rates of 172%, 67%, 54% and 19.3%. In the same period, net profit was 336 million yuan, 1.189 billion yuan, 1.253 billion yuan, 1.466 billion yuan and 1.668 billion yuan respectively. Instant consumer finance also achieved a net income of 7.604 billion yuan and a net profit of 712 billion yuan in 2020, ranking firmly at the top of the licensed consumer finance queue dominated by banking institutions.
At the same time, zhaolian assets exceeded 100 billion yuan for the first time in 2020. Consumer finance loans mainly adopt the mode of batch and pre-credit, and the customer base is relatively lower. That is to say, behind the continuous growth of revenue, profit and asset scale, there must be strong financing capacity and risk control technology.
The capital sources of consumer finance companies mainly include shareholder deposits, inter-bank loans, inter-bank lending, syndicated loans, issuance of financial bonds and ABS, etc. In addition to non-standardized financing, there are no access conditions, and other financing channels are strictly examined for corporate governance, risk management, performance and other regulatory indicators.
At present, a few leading institutions such as Zhaopian, Industrial And Jiaxing have realized diversified financing. Especially, Zhaopian has prominent advantages in relying on interbank loans and issuing financial bonds from its parent bank. The financing interest rate has repeatedly hit new lows in the industry, and the multi-layer capital source channels also provide Zhaopian with debt advantages ahead of the industry.
Since licensed consumer finance companies cannot take deposits, it is not easy for them to achieve billions of dollars in assets and grow their revenues and profits in the same direction. In addition to relying on financial capacity, but also stable asset quality support. According to disclosed data, from 2017 to 2020, the non-performing loan ratio of Zhaomian was 1.24%, 1.93%, 1.77% and 1.78% respectively.
It is worth noting that the non-performing loan ratio of zhaopin, Industrial Consumer Finance and other leading institutions in 2020 is calculated into the non-performing caliber statistics in accordance with more than 60 days. Before consumer finance companies set 60 days overdue as the boundary for non-performing loans, the regulatory boundary for non-performing loans was generally set as 90 days overdue, and shortening the caliber would increase the asset risk exposure level of licensed consumer finance companies. Taking the 60-day caliber defect rate of 1.78% in 2020 as an example, compared with the 90-day caliber defect rate of 1.77% in 2019, it can be inferred that the 90-day caliber defect rate in 2020 is lower than that in 2019, and the non-performing rate has decreased for two consecutive years, with good asset quality.
Therefore, the sustainable growth of consumer finance companies must be based on the advantages of assets and liabilities, in other words, a virtuous cycle of capital and assets must be formed.
03
Ecological science and technology
No matter from the perspective of business model or performance data, leading consumer finance companies are sending a strong signal of strategic iteration: a two-line growth thinking that adheres to long-term values. On the one hand, they integrate long-termism into the company’s development strategy and arrange their technological ecological capabilities in advance. On the one hand, return to the essence of financial business, seize the immediate opportunities under the premise of controllable risks, and achieve a balance between long-term goals and short-term performance.
Since the outbreak of COVID-19, financial institutions have played a close game with the risk cycle in the exhibition environment of rising costs of acquiring customers, narrowing financing channels and high credit risks. Financial institutions’ traditional offline and human-focused service model has suffered unprecedented impact, and institutions with single ecological capacity and weak science and technology have been forced to initiate strategic transformation. Offline consumer finance companies Home Credit and Bank of China announced their full digital transformation last year.
In the context of digital transformation of financial services, the dual-line growth logic of consumer finance companies is driven by science and technology, which promotes network collaboration and business expansion through digital capabilities and assets digitalization, thus realizing a virtuous cycle of capital and assets. As can be seen from the performance of consumer finance companies in the epidemic, the institutions represented by Zhaopin and Jiamun Consumer Finance that carried out the ecological layout of science and technology in advance not only effectively fought against risks, but also consolidated their own barriers after the regulatory regulation and the sudden change in the competition pattern.
The science and technology ecology of consumer finance is based on digital technology, including financing, customer acquisition, risk control, post-loan management, consumer protection and other indicators. Under the principle of rationality and prudence, it not only improves the efficiency of loan issuance, but also ensures the improvement of corporate governance and strengthening of risk control, which ultimately generates sustainable growth momentum for the company.
Consumer finance companies mainly face long-tail customers that are difficult for traditional commercial banks to reach or cannot effectively serve, and the risk cost is relatively high. According to statistics, from 2012 to 2017, the non-performing loan ratio of China’s commercial banks increased from 0.95% to 1.74%; The non-performing loan ratio of consumer finance companies rose from 0.56% to 6.62%, a nearly tenfold increase.
After online consumer financial services, credit risks may be further amplified in paperless and fast business processes. In the face of complex credit risks, consumer finance companies, especially those focusing on online business, balance them through technology ecology.
Take Zhaopian as an example. At the beginning of its establishment, Zhaopian established a development model of pure online consumer finance and continuously expanded its asset scale through shareholder ecology and its own technological capabilities. According to public information, zhaopin currently has more than 60% r&d personnel. Its self-developed intelligent risk control technologies, such as “Woxin Score”, “GPS fishing net” and “Atlas Risk Control”, have achieved industry-leading application effects, such as second-level lending, fraud rejection rate of 2% and zero occurrence of major fraud risk.
Last November, the CBRC issued a notice on promoting consumer finance companies and auto finance companies to Enhance sustainable development capacity and Improve the quality and efficiency of financial services, encouraging consumer finance companies to expand market-oriented financing channels, increase capital supplement methods and strengthen independent risk control capacity building.
For the development of consumer finance companies, the regulatory vision is very clear, that is, technology enables the value cycle, in fact, this has been the first sprint to go public consumer finance companies. At the key nodes of moving up the customer base and competing fine, the strong science and technology ecology will be more favored by capital and get a good valuation.