By Chang Yanjun
Latest data from CBRC show that as of December 15, 2016, China has approved the opening of 16 consumer finance companies. Consumer finance companies and commercial banks carry out dislocation competition and complementary development with cultivating new growth points of consumption as the goal. They enhance the consumption ability of low-income consumers by providing small amount and low threshold consumer credit products.
Steadily promoting the characterized operation
In recent years, the consumer finance companies continued to further provide products and services to third- or fourth-tier cities and gradually built a business grid system with the offline outlets and the online channels supplemented each other, thus the availability and convenience of financial services have been improved. Meanwhile, the category of cooperative businesses has gradually expanded from traditional retailers to other emerging areas of consumption including education, tourism and health through close combining consumer scenarios and actively expanding the consumer credit business to continuously seek characterized development mode.
Sichuan Jincheng Consumer Finance Company attaches great importance to the offline experience and develop deeply the local market by rooted in Sichuan province. Its local cooperative merchants’ number has been more than 1000. Vice chairman of the company He Weizhong said, attaching great importance to the offline business is able to promote Jincheng to excavate deeply the customer demands, design the products through differentiated customizing, and refine the marketing. At the same time of deeply developing offline business, Jincheng is also actively trying to transform to online business and looking for new points of business growth.
The Merchants-Unicom Consumer Finance Company (MUCFC) has established a pure online light operating mode. It expands the consumer finance business in every fields through building online consumption scene platform and docking cooperation partners in background; Suning Consumer Finance Company relies on the shareholder resources to full integrate the online e-commerce platform of suning.com with its more than 1600 offline Suning stores across the country, thus innovated the consumer finance O2O model. Data show that by the end of September 2016, the consumer finance companies have issued consumer durables loans RMB 30.359 billion yuan covering home appliances, mobile phone, digital products and others, and general purposes consumer loans RMB 66.671 billion yuan covering decoration, education, tourism, house renting, high-end medical and others.
Yang Yue, economic analyst of CZBANK, said that under the new economic normal, the importance of consumption in economic growth will be more prominent, and it needs more financial support; replacing the imitation type and wave type consumption with the individualized and diversified consumption means that there will be more polynary consumer demand segment markets and potential customers; the development of Internet technology makes the consumer finance companies be able to use new marketing channel and new way to attract customers and provide personalized and innovative products.
Many challenges in development
The development of consumer finance companies is also facing many challenges. Mao Wanyuan, director of CBRC non bank department, said that the number of participants in consumer credit market has increased and the market competition is now fierce. Commercial banks are increasing their efforts on innovation and support in the field of new consumer credit with the help of specialized agencies, characterized outlets and online banks. At the same time, the evolution of the Internet technology has spawned new industrial formats. P2P lending information intermediaries, small loan companies and e-commerce providers have developed rapidly by precisely seizing the small amount consumer credit needs of low and medium income consumers.
At the same time, the social credit environment needs to be optimized to provide mature credit soil for the development of consumer credit. "At present, China's personal credit investigation system is not perfect and the coverage of credit investigation is limited. The integration of credit information is not so effective that the risk management and control of consumer finance companies is very difficult." Mao Wanyuan said, at the same time, the weak discipline of the society to the dishonesty in small amount loan also exacerbated the fraud risk faced by consumer finance companies.
"As consumer finance companies are still in the early stages of development, the majority of these companies are in staking. It is very easy for the companies to have the phenomenon of increasing blindly the credit amount and returning blindly the commission to the merchants, thus injure the whole market cultivation." Yang Yue said that the profit model and business framework has yet to be improved and the brand image has not yet fully demonstrated.
Insiders said that consumer finance has a strong consumer scene features. Combining with the consumer scene is conducive to the consumer finance companies to cut into the actual credit needs of the customers. Meanwhile, the consumer finance companies should also adapt to customers’ spending habits and carry out product innovation and operating mechanism innovation around improving the customers’ experience. Dong Ximiao, visiting researcher of Chongyang Institute for Financial Studies, Renmin University of China, said that in the future, the consumer finance companies may consider changing the profit model of relying solely on interest difference to get income. They can improve their service value added spaces by providing information intermediary services other than financing to enhance customer loyalty by.
Keeping the "lifeline" of risk control
Data show that as of the end of the third quarter 2016, the average NPL ratio of consumer finance companies was 4.11 percent. Mao Wanyuan said, because the business of consumer finance companies is featured with "no mortgage, unsecured, small amount, dispersed and low-income people oriented, their risk is in a reasonable controllable range, but still need to build a risk defense line.
Chen Ming, general manager of Suning Consumer Finance Company, said that at the early stage upon the launch of Suning Consumer Finance Company, it encountered a double impact of the credit risk and fraud risk, which is also a common problem facing the industry.
To this end, Suning Consumer Finance Company built a "wayward cloud control" system, which combined the functions of pre loan review, loan monitoring and post-loan management. With the help of the whole process fraud prevention and control system based on the big data mining and analysis, plus multi means like face recognition, real name authentication and bank card certification, the "wayward cloud control" system has basic realized the dynamic management of the credit risk and the multidimensional prevention and control of the risk of fraud.
"As an online operated consumer finance company, MUCFC takes the efficient real-time Internet risk control ability as its strong and sustainable development lifeline." Zhang Yangqing, general manager of MUCFC, said that currently, there is fierce competition in the field of consumer finance. The consequences may be the client being in multi debts, which will lead to a biggest risk, namely excessive credit in the industry. With the customers subsiding further, the NPL ratio in the future may rise. It is necessary for the company to balance the quality and quantity within the scope of risk controllable.