2016 could be the alternative finance industry's first net negative year according to AltFi; uncertainty in capital investment was a substantial factor for the first time causing a renewed focus on retail investment; CEO turnover has been a significant factor with Renaud Laplanche's resignation a catalyst for decreased investor confidence; regulators have also caused market uncertainty with new regulations potentially adding compliance burdens for alternative finance businesses; macroeconomic factors including Brexit and the US presidential election have also increased pressure on alternative finance; despite hardships, sentiment for 2017 is mostly positive with 2016 seen as only a temporary retrenchment. Source
After our visits with Jimubox and Lufax the LendIt China tour geared up for the next conference in Shanghai. We co-hosted The Bund Summit on Internet finance over the next two days. The day started off with an exclusive closed door session. Several attendees and LendIt staff were invited to participate in this roundtable discussion to talk about the p2p markets in their respective markets. Other participants included Chinese officials and top executives of the leading p2p lending companies.
In this intimate discussion, participants talked about the Chinese market and how it is the largest and fastest growing. Since investors in p2p lending in China are mostly retail, Ron Suber of Prosper talked about the kinds of institutional investors that invest on Prosper. He stated that retail access will change as investors opt to access this asset class via closed end funds.
Christine Farnish of the P2PFA spoke to the UK market, which is also more retail focused. Platforms in the UK don’t want to be dependent on the institutions and there was agreement that the platforms should diversify capital.
The topic of lack of FICO scoring came up often throughout our trip and the private roundtable was no exception. Participants talked about how they have to rely on current credibility systems and unique ways of underwriting. It was mentioned that these P2P platforms should also lose money when there is fraud on their systems. Chinese officials shared with the group that anyone can start a p2p lending company, which is why there have some instances of fraud within the 2,300 internet lenders in China.
After the first day of the conference, Quark Finance hosted a dinner and cocktail party dubbed “FinTech” night. There were representatives from many p2p lending companies, musicians and even a magician.
The final day of The Bund Summit included a presentation from Greg Gibb of Lufax, the largest p2p lender in the world. He provided several fascinating statistics about the Chinese market. First off, China is a huge opportunity with personal assets totaling 100 trillion RMB. Of those, there are 12 million people who could invest 5 million RMB, 7 million who could invest between 10,000 to 500,000 RMB and 1.3 billion who could invest less than 10,000 RMB.
Greg highlighted that internet finance is great at redistributing finance across regions, with over two thirds of borrowers coming from second and third tier cities. A majority of these borrowers are coming from an offline application, which is a big difference from what we’ve seen in the US. Lufax has stores in over 100 cities for these offline borrowers.
Finally, Greg talked about fraud and stated that 50% of bad loans have something to do with fraud. Many investors in China are interested in investing in the US and other markets. Greg believes that within 1-2 years we will see more cross border opportunities.
To end the morning, we heard keynotes from Christine Farnish of the P2PFA, Ron Suber of Prosper and Matt Burton of Orchard. Audience members were eager to learn from our delegation. They first learned about the P2PFA, the self-regulatory body for the sector in the UK. Ron Suber talked about the industry as a whole and provided insights into the future of p2p lending. Matt spoke about Orchard and how they can help connect platforms with investors. Perhaps someday we will see Orchard connect Chinese platforms with US investors or vice versa.
Our day concluded with a dinner hosted by China Rapid Finance on The Bund, which provided an incredible view of the Shanghai skyline.
Our last day on the LendIt China tour began with a press conference hosted at Dianrong’s office. There was a short panel discussion followed by questions from the media. Our day concluded with a dinner with Dianrong.
Participants on the LendIt China Tour 2015 were given a unique look at the Chinese p2p lending market over the course of our one week tour in Beijing and Shanghai. We came away with new connections, business opportunities and a look at both the similarities and differences between p2p lending markets. Next year, we will be hosting our own conference in Shanghai for the Chinese market. We will continue to connect the rest of the world with the largest p2p lending market, China. Keep an eye on LendIt.co for more details on LendIt China 2016.