China Rapid Finance a consumer lending force in China

Dr. Zane Wang has had a memorable trip to New York City. While many people take in the sights, catch a Broadway show and maybe a Yankees game, Dr. Wang came to do business and he accomplished his goal.

Dr.Wang’s company, China Rapid Finance, began trading on the New York Stock Exchange (NYSE) on Fri., Apr. 28 and the company marked the occasion by ringing the NYSE bell on Mon., May 1.

“It’s a major milestone and very exciting,” Dr. Wang said. “We came here Friday and the stock started to trade.”

A contingent of people responsible for China Raid Finances success from executives to shareholders to staff, shared in the moment.

Dr. Wang completed his Ph.D in statistics at the University of Chicago in 1995 before moving on to Sears Credit where as head of analytics he developed models employing credit bureau data while also overseeing the creation of a credit data warehouse. He returned to China, where in 2001 he founded  China Rapid Finance which began by developing credit scoring and decisioning models that helped companies issue more than 100 million credit cards.

In 2010 they made the move into marketplace lending, where they teamed up with more than 100 Chinese internet companies to analyze and score data that allowed them to preselect customers.

China Rapid Finance rings the bell at the New York Stock Exchange on Mon., May 1. Dr. Zane Wang is fifth from left in the front row.

“That is the best practice in the United States, but in China we were the pioneer in this approach,” Dr. Wang explained.

Seven years later China Rapid Finance has become China’s leading online consumer credit marketplace after facilitating 15 million loans to two million borrowers, beginning with small amounts for short durations and growing into longer-term loans for larger amounts. Dr. Wang calls that a low and grow strategy, one based on building a long-term relationship with China’s growing middle class, whom China Rapid Finance refers to as  EMMAs (emerging middle-class mobile active consumers).

EMMAs total 500 million and have been underserved by traditional credit providers, who focus on the 300 million super prime people who work for government or large institutions, Dr. Wang explained. He estimates China’s consumer credit coverage at roughly one-fourth that of the United States. While roughly 60 per cent of Americans have credit coverage, that rate is 16 per cent in China.

EMMAs are prime and near-prime consumers who are educated and have stable employment in the services and with startups and SMEs, but they have little credit history and cannot obtain bank credit.  They also largely stayed away from the notorious shadow banks, a large (no one knows precisely how large) opaque industry which helped fuel both real estate and small consumer loans.

“They are confident of their earning power and they want to have credit access,” Dr.Wang said.

Dr. Wang said 10,000 investors help fund his platform’s loans. He said they are sophisticated, with a strong understanding of consumer credit and risk.

“Because we have 10,000 investors for two million borrowers, we have what I call intrinsic diversification,” Dr. Wang explained.

The average investor invests between 500,000 and one million RMB, which is $145,000. Institutions, banks, family offices and wealth management platforms may invest much more.

Mobile technology makes this all possible, Dr. Wang said, describing mobile users in China as a “huge, untapped mass market opportunity”. Using their digital footprints to identify and analyze a large amount of nontraditional credit and behavioral data, China Rapid Finance provides a quick and mobile-friendly borrowing experience, he added. Users verify their identity and banking information and within second the money is wired to their bank accounts.

China Rapid Finance charges annual interest rates of 21 per cent with service fees of between one and two per cent, Dr. Wang said.

Dr. Wang is confident in the China Rapid Finance business model due to their focus on building a long-term relationship with customers.

“We’re focused on making customers while others are just making loans. We’re very excited about being the leading online consumer marketplace lending platform. We want to build repeatable, long-term customer relationships.”