Wen Tian Mu

Source: commercial depth of China Investment Network

When it comes to lending, the Chinese can be said to have the spirit of navigators.

After being forced to flee by supervision, the domestic cash loan army experienced the turmoil in Southeast Asian markets. Now, people are once again looking to India, a country with an Internet population second only to China.

Shrewd lenders calculate that in India, with a population of more than 1.3 billion, the Internet and smartphones are spreading at a high speed, the law gives room for high interest rates, and there are not many cash loan players in the market. It is expected to repeat the golden era of cash lending in China in 2017. They, on the other hand, can lie down easily again and wait for the money to roll in.

Interestingly, big companies such as Xiaomi, Ali and Jiufu think so. A small team of only four or five people with tens of millions of yuan thinks the same way. They all flocked to India this year, like British merchants in the 17th century, the ancient oriental country full of gold.

Cash loan flees China

To sum up, Liu Shaocong has been working in the cash loan industry for almost four years. From the beginning as the commercial director of a cash loan company, he was responsible for finding flow and data, and now he and several friends have gone to India to investigate lending. Liu Shaocong has completely experienced the madness and flight of the industry.

Especially in 2019.

The industry hit rock bottom overnight after tight regulation of domestic cash lending in December 2017. Soon after, Liu Shaocong also resigned from the company where he worked. In October 2018, he found that various cash loan WeChat groups, which had been silent for more than half a year, began to become active again. Party An and Party B, who buy and sell systems, traffic and data, have launched demand and advertising in the group.

And this recovery is more ferocious than ever. The lenders hidden underground have intensified their efforts to upgrade cash loans to super-interest loans, with comprehensive annualized interest rates even exceeding 1000%, far higher than they were before the regulatory crackdown.

Attracted by such huge profits, Liu Shaocong and his friends also began to prepare a super-interest lending product to be launched after the Spring Festival in 2019.

More than a month after the Spring Festival, it is the CCTV 315 Gala. "714AA Gun" and the loan supermarket represented by Rong 360 became the last major survey of the party, in which a woman only borrowed 7000 yuan at first and became a debt of more than 500,000 yuan in just three months. After the party, the media reported that local police had arrested a number of illegal lending gangs offline. What people in the industry have been worried about has happened, and underground ultra-interest lending has just emerged and has been suppressed again. Liu Shaocong, who had been staring in front of the TV that night, also knew that the product launch work they had planned was going to stop.

Liu Shaocong is not desperate. Based on the experience of the past few years, he believes that there is still demand in the market, and after a month or two of regulation is over, various loan products will still be springing up like bamboo shoots after a spring rain.

But Liu Shaocong was wrong. He did not wait to recover, but many people around him who had cooperated were arrested by the public security for problems such as collection and data. In September this year, big data Scorpio, Xinyan, Juxinli, Tongdong and other routine loans were investigated, causing an industry earthquake. In October, the Supreme people's Court, together with relevant departments, jointly issued the "opinions on several issues in handling Criminal cases of illegal Lending", detailing the specific standards for illegal lending. By this standard, the vast majority of cash lenders have broken the law.

At this time, Liu Shaocong really realized that the space for domestic lending was completely blocked. The company he partnered with his friends, whose products are not online, has lost nearly 4 million yuan.

The aftermath of Southeast Asia

The era of "lying down and making money" in domestic ultra-high interest rate lending is gone forever, but the model itself can still make a lot of money if it can work. For small teams without technology, flow and capital, if they want to continue to make money by lending, they can only leave China and go overseas in search of new markets, that is, cash loans to the sea.

Going out to sea is nothing new. As early as 2016, Chinese mobile Internet entrepreneurs and investors began to enter Southeast Asia, trying to seize the vast market known as "China five years ago" and recreate a batch of Southeast Asian BAT and TMD. At that time in China, the Internet population dividend had peaked and the growth was no longer crazy.

By 2018, subject to domestic regulation, a large number of cash loan companies also began to go to Southeast Asia, of which Indonesia, the most populous, is the most popular. A large number of delegations flew from Beijing, Shanghai and Hangzhou to Jakarta in Indonesia, Ho Chi Minh in Vietnam, as well as the Philippines and Cambodia, and systems businessmen, legal advisers and financial license brokers also gathered one after another. Some license agents even say they are working with an assistant of a head of state to attract Chinese cash loan companies to land.

In addition to the crazy scene, some people in the industry also show concern. They worry that these offshore Chinese cash lending companies will once again feather Southeast Asia because of greed and madness. Sure enough, this concern became a reality in 2019.

Just as the rise and fall of cash loans in China was triggered by the suicide of college students due to their inability to repay online loans, Indonesia's cash loan industry, after nearly two years of disorderly development, there was also an incident in February 2019 in which a taxi driver committed suicide because he was unable to repay online loans. After that, Indonesia's Financial Services Regulatory Authority announced the ban of 231 illegal P2P lending platforms. From January to August 2019 alone, Indonesia's Financial Services Authority shut down 826 unlicensed financial technology start-ups, including a large number of Chinese cash lending companies, Bloomberg reported.

Not only that, after tighter regulation, the overdue rate of cash loans also began to rise. Seeing the strict control of cash loans by the government, many borrowers take a fluke and decide not to repay the loans. According to a Chinese practitioner who lends money in Indonesia, the average bad debt rate of Indonesia's cash loan industry reached 15% in August this year.

Despite knowing this, Liu Shaocong still has some illusions about Indonesia and wants to see whether Indonesia is really no longer suitable for lending. He spent four days in Jakarta in late November, and as a result of the inspection, some cash lending companies had a repayment rate of only 40%. More importantly, Indonesia's "plate is too small, can only do one or two million, too much can not do." Liu Shaocong told China.com that this means that it is not only difficult for small groups to make money but even lose money when they go to Indonesia to lend money.

Indonesia has the largest population in Southeast Asia, while markets in other places such as Thailand, Myanmar and the Philippines are too small and regulation is tightening. In this case, lending in Southeast Asia was blocked and people began to turn their attention to India.

In order to make exorbitant profits through cash loans, first of all, the market population base should be large, so that the scale of lending can be higher, and the profits will naturally be higher; secondly, the penetration rate of the local Internet, especially the mobile Internet, should be sufficient, and online lending does not need to meet people, so access to information, risk control and so on all need users' data to support.

Most importantly, local laws cannot limit lending rates to low levels. The biggest reason for the blockage of domestic lending space is that the regulatory regulation stipulates that the actual annualized interest rate of loans cannot exceed 36%, which is illegal. If you want to make money at the 36% interest rate, there is no room for small teams, and the market has become the territory of licensed financial institutions and giants such as Ant Financial Services Group and Tencent.

India happens to have these conditions.

According to a report released this year by Nielsen and the Internet and Mobile Association of India, the number of monthly active users of the Internet in India reached 451 million as of March 31, 2019, making it the world's second largest Internet market after China. According to the APUS:2018 India Internet Finance report, India has 300 million smartphone users, accounting for 23% of the total population, higher than Indonesia's 21%. In addition, compared with China, the population structure of India is much younger, with 45% of the population aged 0-24 and 30% in China. And the young group is the main force of online lending.

This has become the first attraction of India to Chinese sea-going groups.

While lending in India, the current law for NBFC (non-bank financial companies) loan annualized interest rate is not clear, the industry default ceiling is 48%. However, by setting fees other than service fees and payment fees, the platform can increase the real loan interest rate to 300%, 400%, which is similar to the interest rate of cash loans at its peak in China in 2017.

Chinese seafarers boarded a flight to India.

Go to India

The first Chinese lender Liu Shaocong and his friends met in Delhi was Fang Jiakang, a data he knew when he was a commercial director at his last company.

When Jia Kang arrived in India in May this year, the loan products were already online. When Liu Shaocong arrived, Jia Kang's company was about to rent a new workplace to accommodate 100 native Indians for telephone collection. To Liu Shaocong's surprise, the rent for such a large venue is only more than 10,000 yuan per month. In the shared space in Beijing, a station costs more than 2000 a month.

In addition to the venue, the wages of collectors are also much lower than those in China. What Liu Shaocong learned is that a native of Delhi earns a monthly salary of about 2000 yuan. The collection team is basically the most important manpower needed to lend in India.

Over the next four days, Liu Shaocong met with five more lending companies, as well as collection companies, rent agents, system dealers and line service providers, and he gradually figured out the mode of lending in India. He calculated that if the initial capital was 10 million, the profit on lending in India could reach 10%, or 1 million. Although it is still a far cry from the monthly profit margin of 30% in ultra-interest lending, it is still profiteering compared to traditional businesses.

According to a number of media reports, it is estimated that under the temptation of profiteering, there are about 30-50 lending platforms in India, including MoneyTap, CASHe, PaySense, as well as Kissht invested by Fosun and KrazyBee invested by Xiaomi, Shunwei Capital, Plum Blossom Angel, Fenqile and so on.

In addition, foreign media and Indian local media have also reported that Chinese financial technology companies, such as Jiufu, Cash bus and WeShare, also began to invest or build their own platforms around June this year to enter India's online credit market.

A Chinese system firm in Mumbai told Liu Shaocong that its monthly lending has reached 1 billion yuan. Liu Shaocong suspects that this figure is watery, but he thinks it can be done if the monthly payment reaches 1 billion over a long period of time. And this system vendor, in addition to docking the products of five cash loan companies, has also made several product loans.

Liao Min, chief executive of Star Alloy, told China.com that he was also in India in early December. Xinghe Financial was one of the first companies to go to Indonesia to provide cash loan system services, and many Chinese companies lending in Indonesia use StarCom's system. As the Indonesian market tightens, Liao Min also sets his sights on India, continuing to sell systems to Chinese companies that lend to India.

Zhang Lingchen was in India at the same time as Liu Shaocong and Liao Min. He is mainly engaged in NBFC license business in India, and this time he is going to take a domestic delegation at a cost of 21888 yuan per person. The contents of the investigation include the local market in India, payment companies, system risk control, compliance and license business explanation and so on.

At the beginning of every gold rush, people like Jia Kang and Liu Shaocong are not the first to make money, but people who sell buckets. When Jia Kang warned Liu Shaocong about the pitfalls of lending in India, he reminded him to pay attention to the Chinese. When Jia Kang first came to India to rent a house, the intermediary he was looking for was Chinese. It was later found that the Chinese was the intermediary, and because the rent in India was cheap, the intermediary sublet it to Jiakang by 60%.

The price of translation has also gone up with the arrival of a large number of Chinese. Nowadays, if Liu Shaocong wants to find a suitable translator in India, he needs to earn more than 10, 000 yuan a month, which is 4000 yuan higher than the normal level.

Two years later, India's cash loan market seems to be as popular as Indonesia has been by the Chinese.

The person who lends the most money is Lei Jun?

Surprisingly, the Chinese who will lend the most in India in the future is likely to be Lei Jun.

Xiaomi's share of India's smartphone market was 26% in the third quarter of 2019, ranking first for nine consecutive quarters, according to Counterpoint. Xiaomi, which has a large number of users, has also copied the model of lending to domestic mobile phone users to India. In early December, Xiaomi officially launched the loan service "Xiaomi Credit" in India. In the previous test phase, Xiaomi has already made loans of nearly 30 million yuan.

Hong Feng, co-founder and senior vice president of Xiaomi, said, "We see great opportunities in India's consumer loan market, and Internet loans are expected to reach $1 trillion by 2023."

However, although this huge trillion-dollar market has many advantages, such as low rent and labor costs, and high real interest rates are not illegal, but an important prerequisite for "profiteering" in lending in India is to invest enough capital. "you don't want to come here under 1000 (ten thousand)." Liu Shaocong said.

A hard entry threshold that is more important than size is the license plate. A license is required for lending in India, and there are three ways to obtain a license: apply, buy and connect. Indian law does not restrict foreign investment into the sector, but the waiting time for approval, whether for applications or purchases, ranges from three months to as long as eight months.

This is not a big obstacle for big companies such as Xiaomi and Jiufu, but for teams like Liu Shaocong who are eager to make money on the ground, they can't wait.

The quickest way is to hang on to a license. Like Zhang Lingchen, the license plate business is mostly done by Chinese people. But what makes Liu Shaocong hesitate is that in India, the money lent to the licensee also needs to be placed in the licensee's account, out of his own control. If the licensee runs away with the money, there is nothing they can do.

As for how to solve this problem, Liu Shaocong and his team, who have returned to Shanghai, still have not found the answer. "ask only one family."

However, they have decided to lend to India. Because in the case of low rent and labor costs, "trial and error costs are very small." After all, as long as you want to make money by lending, India seems to be the only choice at the moment. Liu Shaocong is expected to prepare for about two months, and the product will be available in India after the Spring Festival.

"so if the Indian market is as messed up as Indonesia after the influx of Chinese companies, do you still have a place to lend?" Hit the net and ask.

"Yes, to Brazil." Liu Shaocong answered.

This is actually the way the guerrillas play. And Ali, Xiaomi, Jiufu and other regular troops are already going to have a big fight in India.

(at the request of the interviewees, Liu Shaocong, Jia Kang and Zhang Lingchen are aliases in the article.)