LexinFintech CFO at Harvard University: Opportunities abound for fintech players in China

LexinFintech CFO at Harvard University: Opportunities abound for fintech players in China
01.11.2018 06:49 am

LexinFintech CFO at Harvard University: Opportunities abound for fintech players in China

FinTech StartUps , Infrastructure

Consumer finance is poised to become the next gold mine of opportunity in China's booming financial technology sector, said a senior executive from LexinFintech Holdings Ltd. ("Lexin" or the "Company") (Nasdaq: LX), a leading online consumer finance platform for educated young adults in China. 

In a dialogue with Professor Christopher J. Malloy and Professor Lauren H. Cohen at Harvard Business School on Oct 30, Lexin's chief financial officer Craig Zeng spoke to the audience about the fintech market in China, as well as how Lexin is leveraging advanced technology to serve this largely untapped market where demands for consumer financing are burgeoning. 

Zeng said there is a paradigm shift in the technological scene where the next cycle of growth may be driven by ideas hatched from China. 

"China is absolutely a world leader of fintech that the rest of the world can learn from," said Professor Cohen, who teaches Business Administration at Harvard University. "The country will continue to be an innovation hub (of different technologies) and I think fintech is just the beginning."

China's consumer finance market is projected to grow to US$1.6 trillion by the end of 2020, which is equivalent to the GDP of Mexico, representing a compound annual growth rate of 18 percent, said Zeng.

However, despite the huge demand for consumer financing, only 28 percent of Chinese consumers have credit ratings of any kind, significantly lower than the 86 percent of the US. This lack of credit infrastructure has caused many individuals in China to have unattended credit needs, especially in the educated young adult population. Zeng attributed this to the lack of credit infrastructure and the loan process at traditional financial institutions.

"Traditional financial institutions rely on a credit rating system from the central bank to evaluate loan applications. But those who have credit records are usually individuals who already have a stable income and hence don't require consumer financing," Zeng said.

In response to this issue, Lexin has adopted a forward-looking approach by using a combination of big data and artificial intelligence to assess a consumer's credit worthiness. The company relies on its proprietary risk management Hawkeye, which processes more than 1,000 decision rules and over 7,500 data variables to generate an assessment within seconds. 

"Lexin is trying to provide financial services to customers by predicting their futures, which in this case is assessing the repayment prospects of customers who don't have a credit history," Zeng said. 

"The basis of fintech is that we can help you prepare for the future. As such, it's more important that we know your future than your past." 

Zeng noted that Hawkeye manages 98 percent of loan applications, and as such data evolves over time, the company can even create in real-time a lender's latest credit profile and engage in predictive analytics to understand how this profile may change over time.

With artificial intelligence and big data at play, Lexin is able to streamline the traditional process of loan applications, making it possible for its customers to complete a credit application within just a few minutes without having to submit a bundle of paperwork or wade through red tape.

This has largely improved the operating efficiency of the company. Lexin saw the percentage of its operating expenditure as a percentage of its debt balance steadily drop from 17.3 percent in 2015 to 8.9 percent in 2016 and 5.8 percent in 2017. In the first half of 2018, that number narrowed again to 4.7 percent, hence further boosting the firm's profitability.

Looking ahead, Zeng said the company will continue to diversifying its services to meet the growing needs of customers. It is also eyeing potential investment opportunities in Southeast Asia and the US. 

Related News

US startup Lemonade launches in Europe

Great digital brands transcend borders. Whether in Chicago, Paris, or Singapore, today’s consumers listen to music on Spotify, ride with Uber, and stay at Airbnb. 

... Read more »

Trusted Fintech Program, provided by B-Hive, kicks off with an introduction day in Brussels

B-Hive’s Trusted Fintech Program kicks off today with an introduction day in Brussels. Ten start-ups have decided to join the program in order to understand the ins and outs of... Read more »

Paybase announced as sponsor of FinTech Connect

Paybase has been announced as a sponsor of this year’s FinTech Connect Conference on 5th - 6th December. The UK’s largest FinTech event will this year host 5000 attendees from... Read more »

Taking a Do-it-Together Approach: Side-by-Side with Startups

Leave the do-it-yourself projects at home and make way for do-it-together.

While do-it-yourself may have worked previously, Mastercard believes the best way to drive... Read more »

Oracle and B-Hive launch a fast-tracked monetization ecosystem program for fintech startups/scaleups

After announcing their Fintech Innovation Program collaboration in July, Oracle and B-Hive are taking their next step to jointly launch a fast-tracked monetization ecosystem... Read more »

Magazine
ALL
Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App