China Rapid Finance (NYSE: XRF) Joseph Wang, CSO

In this episode of The Fintech in China Show podcast, we are really pleased to bring you a conversation with Joseph Wang, Chief Strategy Officer of China Rapid Finance. China Rapid Finance is one of the largest consumer lending marketplaces in China, and the second such company from China to IPO on the New York [...]

In this episode of The Fintech in China Show podcast, we are really pleased to bring you a conversation with Joseph Wang, Chief Strategy Officer of China Rapid Finance.

China Rapid Finance is one of the largest consumer lending marketplaces in China, and the second such company from China to IPO on the New York Stock Exchange, where it has been trading under the ticker XRF since April 2017.

In this episode, Joseph shares with us his insights into the unique background of China Rapid Finance, led by its founder Dr. Zane Wang in credit analytics and risk management both in the United States and in China since 2001. 

Joseph shares with us the history of the company, including its move into marketplace lending from 2010 and the details of CRF’s lending and investment matching model. Joseph also shares his unique insights into the licensing requirements for online lending in China. See the show notes below for more.

We hope you enjoy this Q & A with Joseph Wang.

China Rapid Finance (XRF) is one of the largest consumer lending marketplace in China. As of June 30, 2017, CRF had facilitated approximately 20 million loans to nearly 2.7 million borrowers. The company's technology-driven marketplace facilitates loans between borrowers, sophisticated and institutional investors, providing borrowers accessible, affordable credit and offering investors attractive risk-adjusted returns.

Selected links from the Episode

China Rapid Finance on Twitter

Detailed show notes
* With thanks to Xuan Shi.
  • Joseph Wang s shares his background in strategy consulting for banks and tech companies in the United States before coming to be work in fintech strategy in China. (2:30)
  • Joseph's previous role leading strategy at PingAn Insurance's fintech incubator. (3.30)
  • The three ways corporates' participate in online lending in China. (4.30)
  • China Rapid Finance s (CRF) marketplace lending background. (5.30)
  • CRF founder Dr. Zane Wang s background in statistics and then consumer credit & analytics at Sear s in the United States. (6.00)
  • Why CRF founder Zane Wang started China Rapid Finance as a credit analytics consulting business in China in 2001. (6.30)
  • CRFs first decade in business helping to build and install credit decision engines to offer consumer finance at major banks in China which facilitated 100 million credit cards issued across CRFs bank clients. (7.00)
  • CRF starts its peer-to-peer / marketplace lending business in China in 2010. (7.45)
  • CRFs opportunity to partner with Tencent at the end of 2014 to test pilot an online consumption loan on Tencent's QQ mobile platform. (8.30)
  • CRF s first major push in 2015 to offer online consumption loans through mobile devices. (9.10)
  • CRF s online consumption loans for micro-credit come to constitute 90 percent of new loans matched via their platform by 2017. (9.30)
  • The pros and cons of CRF operating as a platform independent of the BATs (Badiu, Alibaba, Tencent) and their affiliates. (10.30)
  • The two types of loans matched by CRF: consumption loans and lifestyle loans. (10:57)
  • How CRF s online mobile consumption loans work. (11.30)
  • CRF s lifestyle loan category, larger-value and short-to-longer term loans based on more extensive and in-person data verification. (12.45)
  • The two proprietary technologies developed by CRF which underpin its consumption loans: predictive selection and automated decision-making technologies. (13.45).
  • How CRF uses predicative selection screening of channel partner customer data to pre-approve credit offers for consumption loans. (14.30)
  • The personal verification data required from pre-approved customers for consumption loans: their full name, national ID, bank account, and mobile phone number. (14.45)
  • How CRF works with data and channel partners to conduct data mining to find customers for consumption loan pre-approval. (16.30)
  • How CRF uses non-structured and non-traditional data to arrive at initial credit assessments based on behavioural data. (17.30)
  • The role of offline credit decision processes in CRFs lifestyle loans via CRFs brick and mortar and walk-in offices. (20.00)
  • The most common consumption loan purposes: borrowers taking their girlfriend or boyfriend out for dinner, cellphone bills, game-card charging, small gifts. (23.00)
  • The most common lifestyle loan purposes: lifestyle events like moving into a new apartment, apartment renovations, weddings. (23.45)
  • How the traditional money-saving mindset is changing among young people in China. (24:30)
  • CRFs target customers: Emerging Middle Class Mobile Active (EMMA). (25.30)
  • China s central credit bureau data: 300 million people with credit data, 500 million plus with IDs but no detailed credit information. (26.30)
  • The interest rates on CRFs consumption loans. (28.00)
  • CRFs fees for taking cash out via a consumption loans. (28.45)
  • How investors on CRFs marketplace lending platform in China provide capital for loans and how investors also bear the loan credit risk. (29:00)
  • Why and how CRF manages credit risk on its platform. (29.45)
  • The scale of CRFs customer base. (31.00)
  • The average number of times CRFs borrowers take out loans via the platform. (31.45)
  • How repeat borrowing based on loan performance enhances credit quality. (32.00)
  • CRFs early repayment interest and fee structure. (33.00)
  • CRF recent shift from a retail only investor model to a retail and institutional investor model. (33:40)
  • How CRFs investors have tended to be high net worth and sophisticated investors with relatively high lending amounts invested in loans via the platform. (34.00)
  • CRFs fractionalised and automated lending model. (34.45)
  • CRFs pricing structure. (36.00)
  • The annualized realised return for investors on CRFs platform. (36.10)
  • The loss rate on loans on CRF’s platform. (36.15)
  • The technical and regulatory factors which lead to mismatches between the deployment of investors funds and loan-matching. (37.00)
  • What sort of data and channel partnerships CRF has with existing institutions. (38:30)
  • The regulatory situation, guidelines and specific requirements for peer-to-peer and marketplace lending platforms in China. (42:00)
  • The role of local authority inspections of online lending company operations. (45.00)
  • The regulatory compliance costs for online lending platforms in China. (47.00)
  • The PRC Supreme Court s rulings on interest rate requirements for online lending platforms in China and its impact on platform income. (47.30)
  • The licensing requirements for P2P lending companies and the online micro-credit lending license issued by the China Banking Regulatory Commission (CBRC). (48:55)
  • The relatively high registered capital and low leverage ratio requirements of the online micro-credit lending license under the CBRC. (49.55)
  • The reasons why CRF chose to become a publicly traded company and raise capital via an Initial Public Offering (IPO) on the New York Stock Exchange (NYSE). (53:00)
  • The future for CRF in China and in the United States fintech space. (55.45)
  • Thank you to Joseph Wang of China Rapid Finance. (56.30)

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