The challenge of expanding consumer finance to China’s vast population can only be effectively tackled with a high-tech solution that enables low-cost customer acquisition, Dr. Zhengyu (Zane) Wang, founder, chairman and chief executive officer of China Rapid Finance Limited (“CRF” or “the company”), told the LendIt USA 2017 conference.

Over the past two decades, China has emerged from being a market that in 2000 featured essentially no credit bureau, decision science, or consumer finance, Dr. Wang said in a March 7 keynote address at LendIt USA 2017, which was held at the Jacob Javits Center in New York City. China’s consumer finance market today boasts many of the same elements as the U.S. China now has a central bureau for credit reporting that covers 800 million people, while credit cards serve about 300 million people, he said.

Still, China’s consumer finance market has a long way to go, in a nation where non-mortgage credit is only 2 percent of GDP, Dr. Wang told the LendIt audience. Only about 16 percent of Chinese consumers have credit cards, compared with about 60 percent in the U.S. 

Some 500 million people still have no access to consumer credit, despite having quality jobs, and rising discretionary spending, Dr. Wang said. This consumer segment has been labeled by CRF as Emerging Middle-class Mobile Active consumers, or EMMAs. The group is characterized by people who are typically 18-29 years old, well-educated, urban, and avid smartphone users. Licensed financial institutions have generally not served this population for a variety of reasons, including the strict regulation of lending rates, and the high cost to collect data from such a large group, he said.

Serving this group effectively demands a high-tech solution utilizing Big Data analytics, Dr. Wang said. CRF has become the largest consumer lending marketplace in China in terms of number of loans facilitated by developing innovative and proprietary technologies that use machine learning and Big Data algorithms to analyze thousands of points of non-traditional and unstructured data. The company uses multiple data channels and draws from online behavior and transactions as data sources, enabling low-cost customer acquisition, he said.

The company’s marketplace lending platform is the only one in China to use Predictive Selection Technology to acquire customers on a massive scale at low cost. This has allowed CRF to facilitate more than 10 million loans as of December 31, 2016.

CRF’s unique technology helps EMMAs to build their credit histories by enabling a “low and grow” strategy to meet their lifetime credit needs. Users start with small consumption loans, to pay for a dinner or an e-commerce purchase, and through repeat borrowing and timely repayment, they can work their way up to larger lifestyle loans for purchases such as travel, education and healthcare.