Chinese Lead Innovation in the P2P Market

Chinese Lead Innovation in the P2P Market

John Spiers


Views 507

Chinese Lead Innovation in the P2P Market

22.06.2016 11:00 am

I’ve made a number of comments about peer to peer (P2P) lending over the last few years which might suggest that I am fundamentally opposed to this type of activity. However, that’s not correct – I am delighted that people are trying to fill the gap left by the banks who seem supremely uninterested in supporting British businesses.

My concerns are that this is still a young sector which has yet to be tested in a serious recession. I suspect that many lenders will be disappointed with the returns they receive in that scenario. It will become clear that some of the P2P platforms have done little more than cursory due diligence on the borrowers and the misalignment of interest between platforms motivated mainly by transaction fees and lenders who rely on the return of their capital will come to the fore. That’s why I still feel that conferring the respectability of ISA status on these loans now is inviting trouble.

However, even in my worst nightmares I can’t see things getting as bad as they are in China. Earlier this year it turned out that Ezubao, one of the largest operators was just a Ponzi scheme and it looks as if lenders have lost billions. More recently Jiedaibao, a less prominent lender, has adopted a novel technique for encouraging its female borrowers to keep up their repayments: it requires them to post nude photos via WeChat. Jiedaibao threatens to publish these if the borrower falls into arrears. With interest rates of around 30% that seems quite likely.

I admire the lateral thinking adopted by another lender. They seem to be facing some cashflow difficulties in meeting redemption requests. Fortunately the owners have a sister company that produces baijiu, the popular Chinese liquor, and have been offering bottles of this in lieu of cash. Maybe they are hoping that lenders will forget about their losses after a skinful of this stuff.

So if you see any of the UK P2P platforms engaging in merger activity in the drinks or media sectors that could be an early warning signal.

Latest blogs

Ian Johnson Marqeta

UK finance finds that 7.4 million in UK living "almost cashless" lives

These findings show that even before COVID-19 struck, digital banking was increasing exponentially. As more people adopt online and mobile banking, the demand for greater personalisation, flexibility and value that consumers expect from their Read more »

Ian Bradbury Fujitsu UK

UK Finance's UK Payment Markets Report - Comment from Fujitsu

Over the past months, businesses have had to rapidly move away from physical cash in order to provide consumers with a safer service. However, this data shows us that a gradual movement away from cash in society started long before the Read more »

James Turner Turner Little

Protecting yourself against a recession

The coronavirus outbreak has spread to businesses, leaving many around the world counting costs. Notoriously, known as the Great Lockdown, it’s been affecting the world economy since early this year. The predicted recession is considered to be the Read more »

Alan Cole JHC Financial

Every Cloud: Covid-19 and the opportunity for digital transformation

Faced with tighter regulations and changing customer needs, over the last decade Wealth Managers have not had it easy – but with the development of new technologies, many have been able to create efficiencies, reduce costs and shrink operational Read more »

Nabeel Irshad Mastercard

Two sides of the same coin: Financial and digital inclusion

The issue of how to tackle financial inclusion has long been a part of the conversation in banking and financial services circles. Regulations have ledto the UK’s biggest banks having to provide ‘basic bank accounts’ to cater for those who do not Read more »

Related Blogs

Karim Ben Hassine KAE

P2P Lending in China: a World Beyond Payments

When contemplating FinTech in China, Alibaba and Tencent – among the world’s largest FinTech disruptors – will most likely be at the forefront of discussions. With market capitalizations of around half a trillion US$, the two tech giants account for Read more »

Angus Dent ArchOver

Tackling the Broken Bank Model: P2P and Investors

Each day brings fresh evidence that the traditional UK banking model is under intense pressure, if not actually on the verge of breaking down altogether. At the same time, peer-to-peer (P2P) finance is on the rise, offering investors greater returns Read more »

Javier Santamaría European Payments Council

Pan-European P2P Mobile Payments are on the Horizon

Did you know that making cross-border P2P mobile payments is about to get much easier? In more and more countries, across the Single Euro Payments Area (SEPA), Person-to-Person (P2P) mobile payment solutions are being offered. Their growing Read more »

Justin Jackson Fiserv

To Grow Person-to-Person Payments, Offer P2P at the Point of Need

No matter how consumers choose to pay, they want the experience to be fast, convenient, consistent – and profoundly simple. People know who, how much and at what speed they want their money to move – and the payment systems they use shouldn't Read more »

Chris Skinner The Financial Services Club

When everything is free, how do we make money?

I have this mantra in my presentations about payments.  Payments is being attacked by Fintech startups like Klarna, Square, Stripe, Alipay, PayPal (Venmo, Braintree) and more.  In fact, according to VentureScanner, it’s the second most active area Read more »

Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel