In just five years, online non-bank lending has gone from a cutting-edge investor favorite to disgrace, scandal and collapse. Financial Regulation and Economic Development, Online P2P Lending and livemint.com, Online lenders were supposed to be more efficient as new, high-tech players. differently. investment plan from the lender/ investor. SCMP, These investors had hoped government will step in and make them whole. In the U.S., the platform is not on the hook if the borrower defaults. A significant number of P2P Lending service providers were illegal or problematic. Your email address will not be published. Nikkei Inc. No reproduction without permission. P2P lending itself would disappear. Angeles Times, Chinese company lived the high life — until it all came It gives quick update on what's going in the market. Jack Ma’s 3-minute loans are changing China’s banking. China’s online P2P lending industry is undergoing a massive shake out. The biggest happened in 2016: Ezubao scammed investors over $7.6 billion through its well-known Ponzi scheme. At the same time, it has to be acknowledged that many Chinese P2P platforms were little more than unscrupulous Ponzi schemes. The spike in failing platforms is evidence that regulators have to a large extent failed to ensure that P2P lending platforms are “information intermediaries” and not financial intermediaries that carry and spread financial risk. The P2P platforms though deserve more, well, credit than they have gotten as they have been a major catalyst for change in China. A heavy-handed police approach to regulatory compliance has also scared legitimate collectors. Centre for extreme case, no CRA at all. © Reuters, A booth of online platform Lufax during an exhibition in Beijing in August 2016: while a borrower's ability to repay a loan could be measured easily, it has been harder to predict their willingness to repay. Thursday December 5 2019, Weekly News Digest, Friday November 29 2019, Weekly News Digest, Account Takeover: Risk Mitigation Techniques for Online Lenders, Thursday November 21 2019, Weekly News Digest, Thursday December 6 2018, Daily News Digest, Thursday December 13 2018, Daily News Digest. P2P lending platform makes the decision. CBIRC has proposed several measures to keep a check on the business of P2P lending platforms. Back to today’s China, is it better for everyone to understand the full picture? As per analysts, the number of failures have risen primarily due to three factors: A critical reason for this meltdown is the harsh regulations ushered in post-Ezubao. Platforms now cannot use independent capital pools to fund the business. It is unlikely that investors will be able to recoup their invested money. Uncommon to have a dedicated in-house compliance or legal staff Given the nature of subprime loans, with short terms and high default rates, higher interest rates should be appropriate. the investor’s the money at the beginning even though there is no borrowerIf the investor this step, Step 7 – Purchase the loan note by using Dee Hung was born and raised in Hong Kong, China. A mandate for P2P companies to self-review and report statistics like unpaid and non-performing loans. In hindsight, online platforms overestimated their ability to differentiate good borrowers from bad. and check investors’ background. Regulatory Responses in China: Opportunities and Challenges. The high ratio of loan losses and even higher share of loans overdue has been too much to bear for the investors who put up cash for lending through China's P2P platforms. Stay ahead with our exclusives on Asia; the most dynamic market in the world. account. The outstanding loans in China were RMB 1.49 trillion (~GBP 171 billion). It is not a loan note format. It has become all the more critical as, now, risk consolidates into fewer (though, hopefully, regulated and well-managed) players as the industry continues to shrink. In early 2016 the Ezubao (e租宝) Ponzi 6 scheme scandal launched the destruction of the ecosystem. From an ecosystem perspective it has changed, but there are a few items that are not transparent enough such as the ways that P2P lending platforms match borrowers and lenders, and procedures for KYC and CRA. Dee also served the largest Canadian financial firm Manulife, the largest Japanese Insurance firm MSIG and as a passionate digital marketer founded (2013) the Digital Marketing Association (HKDMA) in Hong Kong. The flunked P2P platforms include those who ceased operations because either they were not able to repay investors or operators absconded with investors’ funds. Sign up to our newsletters to get our best stories delivered straight to your inbox. Not a legal requirement. The new regulations address the issues at hand, but an awareness campaign educating investors about the pros and cons of investing in P2P lending attempts to curb a similar showdown in the future.
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