What a 10 days I have had in China. The LendIt team has just finished hosting the third annual LendIt China Executive Tour as well as the first ever Lang Di Fintech conference. This trip to China has been one of my favorite experiences since starting in this business 5 ½ years ago. I have learned a great deal, made many new connections and got to spend a lot of time with the 37 people who came on the full seven-day Executive Tour. Here is a review of the past week with many of the highlights.
The Global Fintech Investment Summit in Hong Kong
The LendIt China Executive Tour began in Hong Kong last week where we gathered for the inaugural Global Fintech Investment Summit. This was an event cohosted by LendIt and AMTD, an investment bank and advisory group based in Hong Kong. We brought together a group of almost 150 investors to meet with the tour participants, which consisted primarily of platforms and funds.
Tour members were able to make short presentations to investors and we also organized a ton of 1-on-1 meetings. Lots of new connections were made there with most participants reporting significant interest from the investors. We also visited the Hong Kong offices of CreditEase where we met with people from their investment team who are looking to make investments in international platforms.
Tencent’s WeBank and Weilidai
We traveled from Hong Kong just an hour by bus to Shenzhen in mainland China, often considered the technology capital of China. It also happens to be the headquarters of Tencent, one of the leading technology companies in all of China. Tencent created the instant messaging platform WeChat, which is ubiquitous in China, with over 800 million users. In fact, it is virtually impossible to do business in China today without WeChat – it is the primary form of communication between business people.
At the Tencent offices we met with a senior executive from WeBank who described the work they were doing there. This was one of the highlights of the trip for me as I found it absolutely fascinating. The banking industry has been 100% state-owned until recently and WeBank is the first private bank in China.
But what was most interesting was their discussion around Weilidai – the lending app that is embedded in WeChat. They have one of the most seamless loan applications I have ever seen with borrowers able to secure a loan in just a few taps on their phone screen. They use very sophisticated underwriting based on social and behavioral data that they gather through WeChat. These are small ticket unsecured consumer loans with an average size of $2,000 and APR of 18%. They have more than 1.5 million borrowers with a default rate of less than 0.4%. Very impressive.
Also in Shenzhen we met with Touna.cn, a leading auto lender. Hongling Capital, one of the largest P2P lending companies in China, treated us to an amazing dinner atop one of the tall buildings in downtown Shenzhen. We also had a half-day conference program cohosted by the Shenzhen Internet Finance Association where we heard from many of the leading Fintech companies in Shenzhen.
Alibaba and Ant Financial
After Shenzhen we flew to Shanghai and then caught the train the next morning to Hangzhou – the home of Alibaba and Ant Financial. Ant Financial is such an impressive company. They are the creators of Alipay, the most popular instant payment network on earth with around 700 million users. They have also created the world’s third largest money market fund called Yu’ebao with almost US$800 billion in assets.
The visit to Alibaba was also interesting. They are the leading ecommerce company in China with 423 million users. Their headquarters campus is very impressive and their presentation room was extremely high tech. They showed us live data on this huge screen, bigger than a movie screen, that displayed all kinds of data visually. There were ecommerce orders displayed on a map of the world, hacking attempts, payment transactions and more.
That evening we were treated to the third annual Lufax dinner at one of the nicest venues in Shanghai – the Peace Hotel. The view of the river and city skyline was nothing short of spectacular.
Lang Di Fintech Conference in Shanghai
The final and most significant event on the tour was the Lang Di Fintech conference. Originally called LendIt China we changed the name to Lang Di Fintech to cater more to the local Chinese audience. With more than 80 international attendees and over 1,000 total attendees this was the largest ever international Fintech conference in China.
We had a star studded opening morning with keynote speeches from Ning Tang, the CEO of CreditEase, Soul Htite, the CEO of Dianrong.com, John Stein, the CEO of Betterment and Ron Suber the President of Prosper just to name a few. Some of the key takeaways from these sessions:
- There will be a financing gap of 22 trillion RMB for small businesses.
- There is 47 trillion RMB of investable wealth currently earning very low interest.
- The top six companies control 80% of the online lending market in China.
- Soon China will have 1 billion people living in cities, which will create even more demand for credit.
- Internet finance is a global business; we need to think about global compliance.
In the afternoon we split into three tracks along with four workshops including our Chinese PitchIt event. I chaired the closed-door session that featured leaders from China, the US and the UK. I was struck by how similar many of our challenges are: dealing with regulators, underwriting, the cost of borrower acquisition, attracting investors – these are common themes across all countries it seems.
The star of the second morning of Lang Di Fintech was undoubtedly Anthony Hsieh, the CEO and founder of loanDepot. He was born in Shanghai and lived there until the age of 8 when his parents moved to the US. This was his first trip back to Shanghai since leaving over 40 years ago. He shared his personal journey and you could tell the audience was enthralled with his story. He then described the challenges of being a real estate lender in the US today and why his company started offering personal loans in May of last year.
We heard from many other Chinese industry leaders including Min Xu from Ant Financial, Vince Zhang from Phoenix Finance, Dungui Yan from Niwodai and many more. The other morning highlight for me was James Zhang of the Shanda Group. Shanda is now the largest equity investor in Lending Club. He discussed the reasons they like Lending Club. James said he thinks their underlying business remains strong with massive unmet borrower demand and that Lending Club has a lot of runway to grow much bigger. He also made the point that P2P lending in the US still has low awareness, much less so than in China, and so most of the potential market does not even know about it yet. He also acknowledged the need for Lending Club to develop more diverse funding sources.
Another highlight of the day for me was the presentation by Liang Fang of Puhui Finance. He made the point that in China they don’t lack data; they just lack organized and standardized data. Consequently, in many ways Chinese companies have to be more skillful at underwriting than their US counterparts who have access to a very well established credit infrastructure. The reality is that in China there is so much data that can be collected particularly through mobile apps: geographic data, social data and online behavior – these can all feed the credit models.
Fuxian Wang from CreditEase Wealth Management also made the point that the middle class in China really needs wealth management services. The best way to serve the most people is through robo-advice. The middle class is completely underserved right now but there is a huge need for more education about wealth management and the different options available for these new investors.
I am writing this article on the plane back to the US and while I am certainly ready to be back home I am feeling somewhat wistful to be leaving. I thoroughly enjoyed spending time with so many great tour participants. Getting to spend quality time with some of the leaders from the US marketplace lending community was both personally and professionally very satisfying.
Once again I am in awe of the Chinese market and its massive size and scale. One thing I noticed, though, on this trip that is different to previous trips is the openness that Chinese companies have in exploring opportunities with western companies. The US and China are the clear market leaders globally and we should be cooperating together and I think this trip will mark the beginning of many new relationships. And that is what LendIt is all about.
I want to give a big shout out to the LendIt team and our Chinese partners SyncUS. Everyone on both teams has worked incredibly hard over the last several months to put on a successful event and it exceeded even our high expectations. Finally, I want to give a special shout-out to my good friend and partner Jason Jones. He was the one who championed a Chinese event for LendIt starting way back in 2013. I was often skeptical that we could pull this off and it was his vision and drive more than anything else that made the Lang Di Fintech event such a big success. Thanks Jason.