Eleven of China’s leading alternative finance platforms have signed up to the new FICO Alternative Lending Platform. This is part of a widespread push across China’s alternative finance industry to upgrade risk management on the platforms.
The eleven companies include CreditEase, Yooli.com, Souyidai.com, Helloan.cn, Renrenmoney.com, Sunshine Insurance, Anrunjinrong.com, Firstp2p.com, Xyb100.com and HaoDai.com. And the companies represent about ¥62 billion RMB (USD$10 billion) in loans.
John Chen, managing director of FICO China, commented:
"Risk management is a core competence for all lenders, in part because it has direct bearing on their lending capital and profitability. The FICO Alternative Lending Platform has been designed to meet the needs of a wide variety of organizations in China, from established alternative lenders and startups to traditional finance institutions. Each client will benefit from FICO's consultancy capabilities, which combine international expertise with local insight to ensure the real-time risk management system we deliver is tuned to their specific needs and ecosystem."
The alternative finance market in China is flourishing; by the end of 2014 there were over 1500 platforms in operation. However, the lack of government regulation and poor credit controls resulted in about 275 P2P platforms going bankrupt in 2014. The FICO product looks to ensure the risks of P2P lending are better managed.
Mr. Dagang Guo, general secretary of Beijing Internet Lending Association, added:
"The transaction value from the members of the Beijing P2P Association represents about one quarter of the total industry. The sustainable development of China's P2P industry needs internal self-discipline and the support of external experts in order to protect investors and allow a healthy industry environment to develop. FICO has been well recognized as the global leader in risk management. We are keen to collaborate with FICO to upgrade the industry's risk management."
The FICO Alternative Lending Platform allows platforms to use a risk scoring and decision making system that is specifically tailored to their unique origination process. The platforms are very enthusiastic about the benefits of the FICO product.
Mr. Ning Tang, chief executive officer of CreditEase, explained:
"We have been working closely with FICO since 2011, and have found its global expertise, local insight and professionalism to be very impressive. Here at CreditEase we have witnessed fast growth in the last four years, as we have penetrated different sectors of the internet finance market. We are glad to extend our partnership with FICO to provide more alternative lending offerings to our Chinese customers."
Mr. Mingshun Li, chief executive officer of Haodai.com, also weighed in,
"As the leading P2P search engine in China, we have witnessed all the ups and downs of the industry. Risk management is the key success factor for P2P companies to win the battle against bad loans. If more P2P players take up FICO's affordable analytic and decision-making solutions, it will enable the sustainable industry development and better protect Chinese investors."
Mr. Yannan Liu, chief executive officer of Yooli.com, continued:
"Yooli has worked with FICO to establish our risk management system when our business started. We are proud that our bad loan rate is below the average industry level. The advanced risk management system has become one of our key success factors. We expect the continuous cooperation between FICO and Yooli will support Yooli to grow in a healthy and speedy way."
Mr. Jianwen Xu, chief executive officer of Renrenmoney.com, commented:
"We always stand in investors' shoes to design investment products that offer transparency and profitability. We are motivated to sign up to FICO's Alternative Lending Platform and I believe FICO's experience with top global and Chinese P2P leaders will help us continue offering investors more choices."
And finally, Dr. Simon Sha, deputy general manager, Micro-Finance BU, Sunshine Insurance Group, added:
"We are affiliated to the Sunshine Insurance Group and solid risk management is core to our competitiveness. We are happy to cooperate with FICO, the global leader in banking risk management. We feel confident this cooperation will benefit our clients."
The FICO Alterative Lending Platform will help lenders improve the quality of their underwriting decisions and control credit risks. This is crucial to the continued growth and success of the alternative lending industry in China. It is likely that many smaller platforms will start to use this system. This extra layer of risk management should ensure that the quality of credit decisions in the industry improve.