ant is changing how consumers borrow money from its app

In December 2020, Beijing laid out a guideline for Ant Group to “rectify” its business after calling off its IPO, which could have been the largest initial public offering in history. In the plan, regulators asked Ant to revamp its credit business, among other changes that would make it subject to the same set of regulations overseeing financial institutions. In other words, Ant can no longer get by with its freewheeling practices by calling itself a “tech” firm.

Nearly a year later, the Alibaba-affiliated fintech powerhouse showed that it has almost finished restructuring its popular consumer credit products.

Credit loan products contributed nearly 40% of Ant’s revenues in the six months ended June 2020, according to the firm’s prospectus filed last year. The two main products are Huabei (Spend), which launched in 2014 for daily expenditures by consumers, working like a virtual credit card. A year later Jiebei (Borrow) was introduced as a credit product for larger consumption transactions.

Under the old model, Ant originated loans that were then underwritten by third-party banks and other financial institutions. As of June 2020, about 98% of Ant’s credit balance originated through its platform was underwritten by its partner financial institutions or securitized, according to the firm’s prospectus.

Jiebei has split itself into two brands, users reported earlier this week. Credit lines extended by third-party banks are now called Xinyong Dai (Credit Loan) on Alipay, Ant’s flagship financial services app. Those provided by Ant’s consumer finance company, which was recently established at the behest of regulators, are staying under the Jiebei brand.

Huabei has similarly started a restructuring, which will show users which loans are extended independently by banks and which by Ant’s consumer finance firm. Huabei will focus on “small-ticket” everyday transactions, it said in a Weibo post.

“Following the brand differentiation, users applying for credit loan services will have more information about their credit providers to avoid brand confusion.”

Huabei also noted that it’s now submitting consumer credit information to a database overseen by China’s central bank. It started the routine in September after it established its consumer credit company, which, just like banks, need to report their credit information to the central bank in China.

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