Original title: Ren Zeping: reflection on P2P from blooming everywhere to completely returning to zero Source: Zeping Macro
(Ren Zeping, Fang Siyuan and Liang Jie)
On November 27th, Liu Fushou, chief lawyer of the Bancassurance Regulatory Commission, said that the pressure on Internet financial risks dropped sharply, and the number of P2P online lending institutions actually operating across the country dropped gradually from about 5000 at its peak to zero in mid-November this year.
Since 2012, P2P platforms in China have begun to expand brutally, with about 5000 operating platforms at their peak. However, due to the regulatory vacuum, illegal fund-raising, fraud and other chaos emerge one after another, the P2P industry has experienced three thunderstorms. Since the regulatory retreat, the number of P2P network loan platforms has completely returned to zero. In a short period of less than a decade, P2P has blossomed everywhere to completely return to zero, resulting in the loss of wealth of residents and the intensification of financial risks. The lesson is profound and worthy of reflection.
Abstract
P2P is essentially an information intermediary, which is fundamentally different from the traditional financial institutions as credit intermediaries. P2P transaction model was born in Europe and the United States, originally only aimed at a specific range of minority business models, but after it was introduced into China in 2006, it has deteriorated under the banner of financial innovation. To sum up the lessons of the development of P2P in China, one is the lack of supervision, the alienation of business model, and the other is the natural defects of P2P business model, which is difficult to be sustainable.
P2P Business Model in China: deviating from Information intermediary, Bad money drives out good. Domestic P2P business models are mainly divided into two categories: 1) formal information intermediaries, represented by PPDAI, and 2) illegal credit intermediaries, including guarantee model, super creditor model, asset-like securitization model, etc., all of which are operated in the way of capital pool, deviating from the function of information intermediary, and there are many illegal operations such as term mismatch, self-financing, Ponzi financing and so on. Ezubao and Shanlin Financial case, which shocked the industry, are all alienated credit intermediaries, with a scale of more than 10 billion yuan and more than 1 million investors. Due to the lack of industry supervision, a large number of P2P in the development process to the scale of similar credit intermediary model, squeezing the living space of formal information intermediaries, Bad money drives out good, leading to the rapid accumulation of risks.
P2P business model has natural defects, poor sustainability and moral hazard. After more than a decade of development, Lending Club, an American P2P platform, once became the first in the United States, but it has also become more difficult to survive since 2016. First of all, the sustainability of the information intermediary model itself is poor, relying on the profit model of transaction commission to drive the platform to expand the scale of business, but the commission income is difficult to cover the management and development costs brought about by the scale. Second, there is a natural moral hazard in the model, the platform has the inherent motivation to improve profits in violation of regulations, Lending Club managers illegally borrowed 22 million US dollars in 2016 to improve profits, 2018 Sofi platform exaggerated its loan refinancing returns, customer yields to attract more capital, 2019 Prosper miscalculated and exaggerated platform annualized returns, a series of scandals severely affected enterprises and the industry as a whole. Under the background of profit difficulties, head platforms, including Lending Club, have been transformed into digital banks, combining the advantages of banking license and their own technical advantages to broaden the business boundary.
Looking to the future, on the one hand, the P2P platform in China has been completely withdrawn, and the major formal platforms have been transformed one after another; on the other hand, with the rapid development of financial technology and financial innovation, with the continuous improvement of financial infrastructure construction in the future, regulatory capacity will continue to improve. The recent special meeting of the Financial Committee decided that "the relationship between financial development, financial stability, and financial security must be properly handled." it is expected that the regulatory attitude will also be more prudent in the future to prevent and control financial risks.
Risk hint: excessive financial innovation and financial systemic risk.
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1 the development history and current situation of global P2P
1.1 definition: information intermediary
P2P is an information intermediary, which is different from the function of traditional financial institutions as credit intermediaries. The essential difference between the two is that information intermediaries are not responsible for investors' investment decisions.According to the interim measures for the Administration of the Business activities of Network Lending Information intermediaries issued by four ministries, including the former China Banking Regulatory Commission, in August 2016.Peer-to-peer lendingIt refers to the direct lending between individuals through the Internet platform, which belongs to the category of private lending and is subject to contract law, general principles of civil law and other laws and regulations as well as the relevant judicial interpretation norms of the Supreme people's Court.P2P platform(network loan information intermediary) refers to a financial information intermediary company established in accordance with the law and specializing in the business of network loan information intermediary.
1.2 course of development: steady development abroad, governance from chaos at home
1.2.1 Foreign development: rapid and steady growth for specific market areas
(1) before 2007, early budding: the development of Internet innovation and the diversification of credit demand spawned P2P.The world's first P2P platform originated in the United Kingdom, where the banking industry is monopolized by five large banks, resulting in difficult credit loans for individuals and enterprises, cumbersome procedures, slow speed, high threshold, and low matching efficiency between supply and demand of individual and corporate funds. In 2005, Zopa, the world's first P2P network lending platform, was born in the UK. Its location information intermediary made a profit by collecting fees from both parties, and then the model was rapidly replicated and spread around the world. The most representative P2P platform in the United States was also established at this stage, the American Prosper platform was established in 2006, and Lending Club was established in 2007.
(2) 2007-2015, rapid development: 1)After the outbreak of the subprime crisis, bank credit tightened and a large number of high-risk borrowers who could not get loans turned to P2P.2）Ultra-loose monetary policy hedged the economic downturn, and some funds poured into P2P to promote its rapid development.3) strengthen supervision, curb chaos and promote effective competition.In the United States, the destructive power of the subprime mortgage crisis caused the Securities and Exchange Commission (SEC) to be alert to the P2P industry and set a high threshold for margin and qualifications to enter the industry, resulting in the dominant position of Prosper and Lending Club oligopoly to a certain extent; in the UK, the Financial Conduct Authority (FCA) is responsible for P2P supervision, while the industry association was established in 2011 with a high level of self-discipline.
At this stage, although P2P has achieved rapid development, due to the developed financial system in the United States, all kinds of financial institutions have met a large number of different financing needs, and the rapid growth of P2P is aimed at specific market areas. Specifically, in terms of growth rate,In the US, for example, Prosper and Lending Club loans grew at an average annual rate of 100 per cent from 2012 to 2016.In terms of scaleAccording to a 2016 report by Fiezer, less than 1 percent of people in the United States use P2P loans, far less than 3.8 percent in China.
(3) since 2016, the difficulty of survival has increased: 1)The policy is tightened, the capital is not abundant, and the turmoil in the financial market leads to institutional investors selling P2P assets to avoid risk, which makes it more difficult for the platform to survive.2）In 2016, the head P2P platform Lending Club scandal revealed that the platform CEO tampered with loan information and illegally led to transactions, risk events shook investors' confidence in the P2P industry, and the overall scale of the industry shrank rapidly.3）Financial giants enter the personal loan market to occupy P2P space, and the traditional banks represented by Goldman Sachs, Citigroup and Wells Fargo have a series of supporting mechanisms, such as good brand effect, low cost of capital, mature risk control and so on. In 2016, Goldman Sachs launched Marcus, a personal unsecured online lending platform, and Citigroup and Wells Fargo successively opened online personal lending services to enter new areas of competition.
1.2.2 domestic development: rapid expansion and frequent thunderstorms
(1) from 2006 to 2011, the budding period: the development of the industry is slow, mainly to learn from foreign models, with the existence of information intermediary mode.With the introduction of British and American P2P innovation into China, Yixin first put it into practice in 2006, and PPDAI initiated the domestic microfinance website in 2008. At this stage, the business model exists as an information intermediary model, the borrower publishes the loan information on the platform based on the credit line, and the investor chooses to invest. According to the incomplete statistics of zero-one data, by the end of 2011, the number of online loan platforms in China is about 60, there are only less than 20 active platforms, the average monthly turnover is 500 million, and the number of effective investors is about 10,000.
(2) from 2012 to 2015, the period of barbaric expansion: market demand stimulates high growth, but under the regulatory vacuum, P2P is alienated into credit intermediary.At that time, China's financial market is not perfect, and mainly indirect financing, residents' financial channels are limited, small and micro enterprises, personal financing is difficult, P2P to a certain extent to make up for the lack of financial system, the market demand is greater. From 2012 to 2013, the monetary policy was neutral and tight, and some small and medium-sized enterprises with low credit qualifications were unable to obtain loans. P2P platform combined with private lending began to finance small and medium-sized enterprises, adopting the model of "offline audit + online financing". And require the borrower to issue collateral, while the platform promises to protect principal and interest, showing the characteristics of credit intermediary. From 2013 to 2014, a large number of private lending, small loan companies, financing guarantee companies flooded into the P2P industry, self-financing, capital pool, Ponzi financing emerged one after another, platform risk surged.
At this stage, there are two thunderstorms in the P2P industry: 1) in 2013, the macroeconomic downturn detonated some platform risks.Since 2012, the trend of economic shift is obvious, and the pressure of credit risk has increased, while at this time, the platform of barbaric growth is full of chaos, such as self-financing and false marks, so concentrated default and withdrawal of funds have caused some problems such as the run of the platform.2) from 2014 to 2016, the rise of the stock market led to the withdrawal of liquidity, the landing of superimposed regulatory policies, and the exposure of a large number of illegal platforms.In terms of liquidity, the stock market has continued to rise since 2014, a large number of P2P funds have been transferred to the stock market, and liquidity has been withdrawn; in terms of supervision, policies have landed one after another. In April 2016, the former Banking Regulatory Commission issued the implementation Plan for the Special rectification of P2P Network Lending risks, requiring the establishment of a leading group for the special rectification of online loan risks to conduct a comprehensive investigation. At this stage, running behavior accounts for 65% of the problem platform.
(3) from 2016 to the present: the period of rectifying norms and clearing up. 1) 2016 is the "first year" of P2P supervision.In March, the Internet Finance Association was established, and in August, the former Banking Regulatory Commission and other four ministries jointly issued the interim measures for the Administration of the Business activities of Network Lending Information intermediaries. Subsequently, the three major supporting policies on depository, filing and information disclosure have been launched one after another, and the institutional framework of "1x 3" in the online loan industry has been basically completed.2) 2017 is the "first year" of P2P filing.In December, the leading Group for the Special rectification of P2P Network Lending risk issued the notice on doing well the Special rectification, rectification and acceptance work of P2P Network Lending risks. Due to different enforcement efforts in different places, in August 2018, the leading group again issued the "notice on carrying out Compliance Inspection of P2P Network Lending institutions", comprehensively strengthening the filing requirements.
At this stage, the P2P industry thunderstorm reappears: affected by the decline of macro liquidity, the strengthening of online loan supervision, the decline of investor confidence and other factors, the P2P industry is facing deep clean-up. 1) Macroeconomic downturnFinancial deleveraging continues to advance, liquidity recedes in an all-round way, credit risk pressure increases, and overdue rates increase, aggravating the platform repayment crisis.2) strict supervision and rectificationAfter the first year of filing, first, the platform can not send products to continue the old products, but still need to pay the income on schedule, and even face the investor redemption to make up the principal, the capital chain pressure is significant; second, due to the long filing process in the rectification period, P2P platform liquidity pressure accumulates, a large number of platforms declare liquidation or direct roll money run away.3) investors' confidence has been frustrated.Risk spillover undermines investor confidence and further squeezes out the operation of the illegal platform. According to online loan Home, the number of platforms withdrawing from the industry in 2019 was 732, down from 1279 in 2018, but the impact was greater. Several platforms with a scale of tens of billions of dollars to be collected began to transform and withdraw.
1.3 status quo: the size of foreign transactions is at the level of 10 billion US dollars, and the domestic market has been completely withdrawn.
(1) Foreign markets
In the United States, online loans are mainly high-quality unsecured consumer loans, followed by small business loans and student loans. As a high-risk niche market, the current trading volume is in the range of 10 billion US dollars and the market share is not high.Take the consumer loan market as an example. According to the 2016 P2P white paper of the US Treasury, the size of the consumer loan market reached 3.5 trillion yuan, of which the online loan platform contributed less than 1%. In addition, from the point of view of product settings, its online products are similar to those of traditional financial institutions, but the interest rate is obviously higher.
(2) domestic market
P2P in China is mainly unsecured consumer loans, in addition, there are corporate loans and loans with cars and real estate as collateral.According to the statistics of online loan House, as of 2019, the cumulative transaction volume of P2P was about 9 trillion yuan, and the overall loan balance of the industry was 491.591 billion yuan, down 37.69 percent from the same period last year, the lowest in nearly three years. The loan balance accounts for about 1.1% of the consumer loans of financial institutions.
By the middle of November 2020, China's online loan platform has been completely withdrawn.By the end of December 2019, the number of normal operating platforms in the online loan industry had dropped to 344, a decrease of 727 compared with the end of 2018. Liu Fushou, chief lawyer of the Banco Insurance Regulatory Commission, said on November 27, 2020, "Internet financial risks have fallen sharply, and the number of P2P online lending institutions actually operating across the country has gradually dropped from about 5000 at its peak to completely return to zero in mid-November this year."
P2P transaction model, which was born in Europe and America, is only aimed at a specific range of minority trading model. however, in a short period of less than 10 years, from blooming everywhere to chicken feathers in our country, a large number of platforms are involved in illegal fund-raising, fraud and other illegal activities. resulting in the loss of residents' wealth, the intensification of financial risks, and painful lessons. What is the problem of P2P in our country? In the following, we explore from two angles, one is China's unique P2P business model, and the other is the essential problems of P2P business model.
2Peer-to-peer business model in China: deviating from the information intermediary and causing chaos.
2.1 typical business model
2.1.1 Information intermediary: platform model (individual-personal)
Pure P2P platform only matches information and does not participate in guarantee.The platform uses its own big data risk control ability to select borrowers with good qualifications and credit, and publishes their information on the investment platform, and the investors select the targets of the corresponding amount and time limit according to their own needs. The two parties to the loan contract are the borrower and the investor directly. As an information intermediary, the platform is only responsible for examining the qualifications of borrowers, disclosing information, brokering deals, assisting investors to recover defaulted claims, and charging part of the service fee.
Typical case: PPDAI-- firm platform model, information intermediary
PPDAI was founded in Shanghai in 2007 and was successfully listed on the New York Stock Exchange in November 2017. As of March 31, 2020, the cumulative number of borrowing users of the platform is 16.53 million, the cumulative number of investment users is 713000, and the cumulative total transaction volume is 178.2 billion yuan.
1. The platform model is a staunch supporter.
1) the operation of the capital side cooperates with a well-known third party:The platform cooperates with well-known third-party payment platforms with payment licenses issued by the central bank (such as Alipay, Tenpay, etc.) and the banking system to realize the receipt and payment of users' recharge and withdrawal funds.2) the asset side uses big data for asset screening and fraud detection:The platform uses a unique risk pricing model to collect the borrower's basic personal information, social attributes and objective background to detect fraud. At present, PPDAI's risk identification model has more than 2000 dimensions and more than 400 personal reference factors. Data acquisition cooperates with authoritative organizations such as the Ministry of Public Security and technology to capture Internet social network information.3) enhance the attractiveness of non-guaranteed principal guarantee:In the alternative guarantee policy, the platform forms a risk reserve by requiring borrowers to pay extra fees, and protects the overall principal of investors for investments that meet specific conditions. The protection process does not include risk, creditor's rights transfer, and does not bear credit risk.
two。 The barbaric development of the industry marginalizes PPDAI, and the strengthening of supervision benefits the platform.
1) the profit model of the platform is mainly based on the fees charged to borrowers.Under the pure information platform model, the source of income comes from 1 service fees charged to borrowers, with loan service fees and post-loan service fees accounting for 75-90 per cent of income in 2015-2019; and overdue fees and compensation, and other income accounts for 5-15 per cent in 2015-2019.2) this profit model caused the growth of PPDAI loan transaction scale to be slower than that of the same industry, and the profit and loss for nearly 9 years since its establishment, and the positive income was not achieved until the supervision and rectification of the illegal platform.Since 2012, the barbaric outbreak of the industry, most P2P platforms quickly obtain funds through the Internet, quickly increase the transaction volume by means of credit guarantee, squeezing PPDAI's living space. PPDAI did not make a profit until 2016, when the supervision of online loans was strengthened and the status of P2P information intermediary was confirmed. According to PPDAI's official website, 37 days before and after the release of the interim measures for the Administration of Business activities of online Lending Information intermediaries, the trading volume of the platform increased by 39%, the balance of new loans increased by 34%, and user investment increased by 31%.3) however, the stricter supervision of the industry as a whole has led to a decrease in market participation, and the growth rate of platform net profit has continued to decline since 2016.
3. Since the supervision of the withdrawal of P2P, the platform has been transformed, and the online loan business has been completely withdrawn at present.
PPDAI changed his name to Xinya Technology in 2019, shifted his business focus to financial technology and reduced P2P services. At present, he has successfully withdrawn the online loan business. In addition, PPDAI introduced funds from financial institutions, transformed lending institutions and cooperated with banks to carry out loan business. In 2019, institutional funds have reached 51 billion yuan, accounting for 62% of the total loans on the platform.
2.1.2 one of the types of credit intermediaries: guarantee model (individual-platform-individual)
Under the guarantee mode, the platform provides principal guarantee and even interest guarantee, which has the characteristics of indirect financing, and the capital pool model is popular.The function of P2P platform is not only limited to screening borrowers, but also can provide guarantee and matching funds, has the functions of information intermediary, capital intermediary and risk intermediary, and is alienated into financial institutions. The platform operates in the mode of capital pool, on the one hand, it ensures the just exchange, uses the fund pool to unify the operation of funds and assets, and directly misappropriates funds in the event of default payment, on the other hand, through continuous rolling issuance of products, to achieve short-term loans and long-term loans.
However, the platform lacks the institutional security advantages of financial institutions, most of the platforms have weak risk control ability, risk accumulation, opaque capital pool and non-correspondence of capital assets: 1) lead to moral hazardThe platform is running away, misappropriated or self-melting.2) induce a Ponzi schemeThe platform sends new products to old projects to maintain operation, and the risk cannot be resolved.3) cause a chain reactionAll the products under the capital pool can not be risk isolated, and the risk exposure of a product will lead to a series of trust crises and runs.
Typical case: Ezubao-illegal fund-raising to build a Ponzi scheme
Since its launch in July 2014, Ezubao has quickly ranked among the forefront of the industry. According to the statistics of the data center of zero-one research institute, by the end of November 2015, the cumulative transaction data of Ezubao was 70.3 billion yuan, ranking fourth in the industry.In December 2015, the public security organs filed a case against Ezubao. For a while, Ezubao, once the benchmark of the industry, was transformed into "the first major case in P2P", involving illegal fund-raising of more than 50 billion yuan and more than 900000 victims, and learned a painful lesson.
1. Company background: financing platform of "Yucheng system"
At the top of "Yucheng system" is Yucheng International Holdings Group Co., Ltd., which is registered abroad, and the actual control is Ding Ning. In February 2014, "Yucheng Department" acquired and transformed the network platform, and in July 2014, the reformed "Ezubao" went online under the banner of network finance. Since then, Yucheng has gradually formed a fund-raising, smuggling and fraud business system with "Ezubao" as the core.
two。 Operation mode: focus on the A2P model, the actual fictional financing projects, through the capital pool to operate the "empty glove white wolf"
Under the "A2P" (Asset to Peer) model claimed by Ezubao, in theory, Yucheng Group signed an agreement with the project company through its subordinate financial leasing company, and then financed the project in the form of debt transfer through the Ezubao platform. However, in practice, 95% of the financing is Ding Ning's fake projects through the purchase of enterprise information. Police investigation shows that Ding Ning instructs people to use 1.5% of the financing amount to buy information from enterprises, totaling more than 800 million yuan. Ezubao constructed false financing projects through the enterprise information purchased, continuously raised funds, and remitted them into its own capital pool, and built a Ponzi scheme by borrowing the new to return the old, self-guarantee and other ways, with a cumulative transaction volume of more than 70 billion yuan.
3. Marketing mode: graspOrdinary peopleLack of financial knowledge, commitment to capital preservation and high expected annualized returns
According to CICC, since 2014, Ezubao has carried out advertising in major well-known media with a total size of more than 140 million yuan, creating a good business image for Ezubao. On the one hand, Ezubao attracts attention with its high rate of return, and the expected annualized return of its six products is 9% Mur14.6%, which is much higher than that of bank wealth management products. On the other hand, through the personal promotion of huge consignment companies and sales personnel, it promises to preserve capital and draw money flexibly, seizing the weakness that ordinary people know little about financial knowledge, and the scale of fund-raising has expanded rapidly.
4. Use of funds: most of the fund-raising money is used for profligacy, giving gifts to others, smuggling and other criminal activities
According to the results of the police investigation, in addition to using some of the funds absorbed to repay principal and interest, a considerable part of Yucheng is used for personal profligacy, maintaining the company's huge operating costs and advertising hype. According to Zhang Min, the president, there are about 80 executives in the group with an annual salary of one million yuan, plus tens of thousands of employees, Yucheng Group paid 800 million yuan to employees in November 2015 alone, so the expenditure in this area is conservatively estimated to be billions of yuan. In addition, the value of cash, real estate, vehicles and luxury goods donated by Ding Ning to others amounts to more than 1 billion yuan. For Zhang Min alone, Ding Ning not only gave her a Singapore villa worth 130 million, pink diamond rings worth 12 million, luxury cars, famous watches and other gifts, but also "rewarded" her 550 million yuan.
On September 12, 2017, the Beijing No. 1 Intermediate people's Court publicly announced its verdict.The defendant, Ding Ning, was sentenced to life imprisonment for fraud, smuggling of precious metals, illegal possession of guns and crossing the border, deprived of political rights for life, confiscated of 500000 yuan of personal property and fined 100 million yuan. At the same time, 24 defendants, including Zhang Min, were sentenced to fixed-term imprisonment ranging from 3 to 15 years on charges of fund-raising fraud, illegal absorption of public deposits, smuggling of precious metals, and cross-border crimes, and were also sentenced to deprivation of political rights and fines.
2.1.3 type of credit intermediary II: Super creditor model (individual-platform-individual)
The super-creditor model means that some of the actual controllers of P2P platforms assume the role of third-party professional lenders themselves.The controller of the platform borrows money directly from the borrower, and then splits, combines and transfers the creditor's rights to investors through the platform, which completely deviates from the function of information intermediary, and there are a series of potential risks such as term mismatch, capital pool, validity of creditor's rights transfer and so on.
Typical case: Shanlin Finance-Super lender, fictional claims
In October 2013, Zhou Boyun founded Shanlin Financial Company in Shanghai, mainly engaged in Internet financial information services, loan consulting, investment management and other businesses. In the early days, the company sold debt transfer wealth management products to the unspecified public through offline stores, and the number of stores expanded to 1000 in less than two years. In 2015, the company successively set up four financial platforms: "Shanlin Wealth", "Shanlin Bao", "Yibao loan" and "Guangqun Finance" to sell illegal financial products.On April 9, 2018, the actual controller turned himself in. after investigation by the public security organs, the illegal fund-raising totaled more than 73.6 billion yuan, involving more than 620000 people across the country, of which the actual unpaid principal of investors totaled more than 21.7 billion yuan.
1. Company background: setting up a platform for the purpose of self-financing
After being arrested, Zhou Boyun took the initiative to confess to the public security organs that one of the purposes of establishing Shanlin Finance was to fill the financial loophole in personal investment in real estate projects and to transfer funds for his Qualcomm Shengli investment in the real economy. Impure business motivation will inevitably lead to greater risks in the business model of the online loan platform.
2. Operation mode: fictitious claims, packaged and sold
Zhou Boyun and others provide funds directly to borrowers, and then package and split their debt projects into products for investors to choose from. The platform attracts investors with high returns and other attractive conditions, introducing that project funds have been invested in a number of capital-intensive projects, such as new retail, real estate, automobile manufacturing, infrastructure construction, and so on, while most of the loan information is forged. After pooling user funds, a private fund pool is set up, and the funds actually invested in the subject matter of the entity account for less than 5% of the total amount raised, and the rest of the funds go to Shanlin and its related parties.High returns behind the lack of real asset support, investment projects are not profitable, can only rely on borrowing the old to maintain the operation, the capital gap is increasing, the operational risk is increasing day by day.
3. Marketing mode: offline store promotion + online Internet marketing
Three major ways to illegally absorb huge amounts of fundsFirst, set up more than 1000 offline stores to develop online marketing.Recruit employees with high salaries and commissions. After training, they will attract customers by means of advertising, telephone promotion and word-of-mouth.The second is to promise high returns.Offline sales of "Xin Yueying" and other debt transfer products promise an annualized income of 5.4% and 15%. Online, through platforms such as "Shanlinbao", several targets with a yield of more than 10% are released, and investment incentive policies are launched. Old users recommend new rebates, and so on.Third, the strength of packaging enterprises, shaping the image of "too big to fail"Including doing public welfare in a high profile, participating in the awards of various institutions to win the trust of investors.
4. the use of funds: borrow the new to return the old, and the investment projects are lack of profitability.
The platform costs a lot of money.One is to repay the principal and interest of the previous investors, to create the illusion of high profits in investment projects, to maintain the Ponzi scheme, the second is to invest a small amount of money into physical projects to avoid regulatory investigations, and the rest is used for related parties, and the third is the company's high operating expenses, including huge brand image packaging fees, high salaries for salespeople, luxury store rental fees, and so on. According to the final investigation results of the public security organs, of the more than 73.6 billion yuan involved in the case, 56.76 billion yuan was used to pay the principal and interest of previous investors, 3.46 billion yuan was used for project investment, equity acquisition of companies, and purchase of overseas stocks, and more than 3.54 billion yuan was used for off-line and online loans of Shanlin assets. the rest is used to pay the company's operating expenses, staff salaries, related companies, and so on.
Due to the chaotic operation and management of the company, poor management of investment projects and other reasons, the funding gap of the company increased. Zhou Boyun surrendered to the public security organs in April 2018.Under the condition that Shanlin Finance does not have any qualifications, through public publicity and promises to protect capital and interest, it illegally absorbs funds from the public, and the investment projects are not profitable, and only rely on borrowing new and returning the old to maintain the operation of the company.On July 24, 2020, the Shanghai No. 1 Intermediate people's Court announced its verdict.Shanlin Financial Company was sentenced to a fine of 1.5 billion yuan for fund-raising fraud, Zhou Boyun and Tian Jingsheng were sentenced to life imprisonment for fund-raising fraud, and fined 70 million yuan and 8 million yuan respectively.
2.1.4 the third category of credit intermediary: asset-like securitization (individual-platform-institution-individual)
Asset securitization business, that is, by packaging assets, securitized assets, trust assets, fund shares and other ways on the asset side, transferring creditor's rights on the P2P platform, bypassing the formal processes such as exchange listing in the process of asset securitization.Some platforms split claims into smaller amounts and more flexible terms, which lowers the threshold for investors, which in essence becomes a way for online lending institutions to evade supervision and operate the products of licensed financial institutions, resulting in cross-industry risk accumulation. Due to the lack of supervision in the early stage, it is not uncommon to build a large-scale P2P platform in the way of asset-like securitization.
Typical case: an online loan platform-- the product structure is introduced into factoring company and gold exchange.
A certain platform belongs to the "small loan asset equity project" of asset securitization that entered the business of asset securitization earlier and launched in the early stage of asset securitization. After the regulation, rectification and reform have been promoted one after another, and the platform has gradually returned to the nature of information intermediary.
1. Operation mode
The "small loan Asset Equity Project" products bypass the conventional process of asset securitization by introducing factoring companies, gold exchanges, etc. 1)The small loan company entrusts the credit income right to the asset management company to register and list in the local financial asset trading center.2）The asset package of the trading center is transferred by the cooperative factoring company to form the income right of the creditor's right.3）The platform through the transfer of factoring company debt income rights, and the share is transferred to a number of investors to form asset-like securitization. At the end of the investment period, the initial small loan company shall buy back the income rights of the creditor's rights from the factoring company and the factoring company from the investors.
2. The product income is stable, but there is obvious compliance risk.
Different from other high-income platforms, the overall income of a certain platform is lower than the average level of the online loan industry, attracting investors with both robust and safe products and income. On the one hand, the target comes from the assets provided by the guarantee company, on the other hand, it appropriately increases the rate of return, and the rate of return of the products on the platform is slightly higher than the listing rate of 1BP of the product listed on the gold exchange. But in fact, there is a certain relationship between the factoring platform, guarantee agencies and the actual controllers of the platform, and the risk is still not obviously isolated.
2.2 Summary: behind the chaos are imperfect credit information system, lack of supervision, lack of investor professionalism, and opaque asset pool.
P2P is originally an information platform which is significantly different from traditional financial institutions and complements the financing function of the financial system to a certain extent. However, there is no supporting infrastructure for the development of P2P in China, and it has been in a regulatory vacuum for a long time, which leads to a large area of risk chaos and is easy to lead to systemic risks.
2.2.1 Regulatory system: excessive financial innovation but regulatory vacuum, leading to frequent chaos
P2P in China has been in a regulatory vacuum for a long time, and there is a lack of specific direct management of departments and laws. After the publication of regulatory documents in 2016, we only pay attention to "in-process and after-event" supervision, with low barriers to entry, a large number of violations of laws and regulations, malicious fund-raising, roll money running away are common, and the illegal cost is low. Under the strong supervision since 2017, the leading group for the special rectification of online loan risks led the route, and the local financial offices were responsible for the specific rectification, and there began to be a tide of P2P clean-up. In 2019, the Mutual Fund Administration Office and the Internet loan Regulation Office issued document No. 175, proposing to adhere to the institutional withdrawal as the main work direction, increase the intensity and speed of the rectification work, and put P2P supervision on the right track.
2.2.2 Business model: lack of investor professionalism and opaque asset side
On the capital side, 1) the financial channels of Chinese residents are limited, and the P2P investment side is dominated by natural person investors.On the other hand, the threshold for P2P investment is low, and the investment can often start with one hundred yuan and one thousand yuan, which leads to the entry of many natural persons who do not have the ability to effectively identify risks, and it is difficult to effectively identify health assets with professional due diligence. Take lufax as an example, as of June 2019, the largest ten households on its platform accounted for 0.33% of the lending balance.2) investors are used to rigid paymentRigid payment is a common problem in China's asset management industry for a long time, and it is also one of the main reasons for risk accumulation. On the one hand, investors hope to get high returns through the P2P platform, on the other hand, there is still a solidified thinking of rigid payment, while the newly established P2P platform has the motivation to promise rigid payment in order to attract customers, increase traffic and become bigger and stronger rapidly. gradually accumulate risks.
On the asset side, 1) under the fund pool mode, the platform manipulates the asset side, so it is impossible for funds to correspond to assets one by one, and the use of funds is controlled by the platform.First, the platform is easy to quickly raise funds in the short term and run away; second, the platform repeatedly issues false targets to maintain related party projects of the platform; third, it may illegally raise funds to return the principal and interest of raising funds, pay employees' wages, and pay publicity costs, or misappropriate funds to speculate in stocks or real estate at will, forming a Ponzi scheme.2) borrower's credit riskWithout access to the credit information of the central bank, borrowers are prone to long loans and a large number of defaults due to the moral hazard of borrowers.
2.2.3 Infrastructure: the credit system is not perfect
China's credit information system is still advancing, and big data's risk control ability is weak.According to public data, as of August 2017, the personal credit information system of the people's Bank of China included 930 million natural people, of which only 460 million had credit business records and low credit data coverage. In addition, the country's first licensed personal credit information agency, "Baihang Credit Information", was put into public testing in January 2020, and the effect remains to be seen. If the platform itself does not have the ability to collect big data, and it is difficult to obtain external database, it is difficult to form effective credit evaluation data, the risk control ability of the platform is poor, and borrowers are prone to long loans and a large number of defaults.
The guarantee mode is limited, so it is difficult to make up for the lack of risk control.There have been various modes of self-guarantee and risk reserve extraction on P2P platform before, but this model violates the nature of information intermediary. Such models are completely prohibited in the interim measures in 2016 and the notice on doing a good job in the special rectification, rectification and acceptance of P2P network lending risks at the end of 2017. Since the guarantee model is regulated, the guarantee mechanism that P2P institutions can choose is still very limited.
(3) to see the essence of P2P business model from the development of foreign giants.
3.1 typical business model: pure information intermediary
The online lending platform in the United States mainly has the following models:1) Direct lending modelThat is, institutional investors or qualified investors lend money directly to borrowers through the platform. The platform model of our country is similar to this model.2) platform lending modelFirst of all, cooperative banks issue loans, P2P platforms directly transfer claims, or securitize assets according to the corresponding loans, and then sell claims or securities to investors.The P2P model in the United States is similar to that in China, but it adheres to the function of information intermediary, there is no direct contact between borrowers and investors, and the platform does not guarantee and bear credit risk, so there are fewer risk events.
3.2 case of Lending Club, an American peer-to-peer giant
3.2.1 Evolution of business model
The business model of Lending Club, the number one platform in the United States, has gone through three periods:
1) Direct lending model (June 2007 to December 2007)Under this model, the borrowing member applies for a loan from the LendingClub, the LendingClub issues the loan to the borrowing member, and then transfers the loan from the borrowing member to the investor. LendingClub actually acts as the intermediary transferor of the loan and provides follow-up services for the loan business, but does not bear the loan risk.
2) platform Lending 1.0: loan transfer Model (January 2008 to March 2008)Because in the direct lending model, the platform makes loans to borrowers to become capital lenders, Lending Club needs to obtain state-by-state lending licenses, which greatly limits the expansion of its business. In order to circumvent loan licence applications and avoid state interest rate caps, Lending Club partnered with licensed WebBank to market its business nationally. In this model, the loan of the borrowing member is issued by WebBank, and the loan applied by the borrowing member is transferred to LendingClub at a par price without recourse. After obtaining the loan from the transferred borrower, LendingClub sells the loan directly or in the form of its debt income certificate to investors.
3) platform Lending 2.0: asset Securitization Model (after October 2008)In October 2008, SEC strengthened its supervision and required P2P operations to comply with the relevant legal standards of the securities industry. LendingClub officially entered the asset securitization mode by registering in SEC. The difference between this model and the platform lending model is that the investor buys the "member repayment supporting bonds" issued to it by the platform. The investor is the unsecured creditor of Lending Club and has no direct debt relationship with the borrower, but the return depends on the loan invested.The asset securitization model of P2P platform in China is similar, but the process platform of asset securitization in China bears credit risk and deviates from the origin of information intermediary.
3.2.2 profit model
Lending Club's revenue mainly comes from transaction fees charged to borrowers.The main revenue of the platform includes1) transaction fees charged to borrowersAccounting for about 75% of net income and 90% of net income. The borrower who successfully obtains the loan pays a lump sum transaction fee of 1% to 6% to the platform each time.2) the investor service fee charged to investors accounts for about 10% and 15% of the net income.Each time the borrower pays the principal and interest to the investor, Lending Club deducts 1% of the service fee from the investor account and charges the institutional investor an annual account management fee of 0.7% to 1.25%. Other more important income are income from the sale of loans and non-interest income, accounting for less than 10%. At the end of 2019, LendingClub transaction fees were US $599 million, accounting for 78.9%, followed by investor fees of US $125 million, accounting for 16.4%.
3.2.3 leading risk control model to effectively control the rate of bad debts
The platform risk control model is mature, and the grading system can effectively distinguish the credit level.The credit system in the United States is relatively mature. According to the algorithm provided by FICO, the three major credit bureaus use their respective databases to calculate the corresponding FICO personal credit scores. Lending Club sets more stringent entry conditions on the basis of FICO score, including FICO score higher than 660 and at least three years' credit history, etc., and then divides it into seven levels according to the borrower's score and credit data through the internal model algorithm. The higher the grade, the lower the interest rate. The Lending club risk control system is effective, and the bad debt rate increases strictly according to the rating level.
The overdue rate and bad debt rate are in the range of decline.The overdue rate of Lending Club has continued to decline since 2012 and continues to be lower than the average overdue rate of consumer loans in the US banking sector. However, after the risk events in 2016, the overdue rate rose rapidly from less than 2% to more than 3%. Since then, although it has remained above 3%, the delinquency rate and bad debt rate are still in a downward range. In 2015-2019, the overdue rate of bills and vouchers fell from 3.3% to 3.1%, and the bad debt rate of standard products decreased from 8% to 7%.
3.2.4 unprofitable and weak revenue growth
Lending Club did not make a profit after going public.It made a profit of $7.31 million for the first time in 2013, but lost more than $100m a year from 2016 to 2018, shrank in 2019, but lost more than the whole of 2019 in the first quarter of 2020. The reason is that the profit model of collecting fees through transactions is not sustainable, it is necessary to maintain the rapid growth of the scale of loan transactions, and the fee income is difficult to cover the high management fees and product development costs, which makes it difficult to make a profit.
The growth rate of operating income continued to decline after the revelation of the scandal in 2016.The nature of the P2P business model drives the platform to continue to expand its business scale. In order to achieve its performance target in 2016, CEO LaPlanche boosted profits by tampering with the application dates of two loans totaling 22 million yuan and illegally selling them to some investors. After the incident was revealed, investors left in large numbers, and the platform's revenue growth, profits, asset quality and share price fell across the board. CEO's share price fell 36.5% in four days after platform CEO resigned due to a risk incident on May 9.
3.2.5 P2P giants seek transformation
The outbreak of Lending Club risk events shook the credit foundation of the P2P industry, and the overall scale of the industry shrank rapidly after 2016.The risk event of Lending Club shakes investors' confidence in the US P2P industry. The trading volume of the industry has declined significantly since the outbreak of violations in 2016. In addition to Lending Club, the revenue and loan trading scale of industry leaders such as Prosper and OnDeck have also shrunk significantly.
When it is difficult to make a profit, giants such as Lending Club transform into digital banks.According to the 2019 annual report, Lending Club will acquire Radius Bancorp, an online bank based in Boston, for $185 million in cash and stock. Future growth may rely on transformational credit intermediation to achieve the sustainability of the business model through the profitability of traditional financial intermediation. In addition to Lending Club, many large-scale online lending platforms such as Zopa and SoFi have also transformed to banking business, obtaining the advantage of banking license, making use of the experience accumulated in cooperation with banks under the platform lending mode, combined with their own technical advantages, to develop digital banking business.
3.3 Enlightenment from the development of P2P in the United States: there are defects in the P2P model itself and the sustainability of the model is poor.
(1) A sound credit information system and other infrastructure and a timely follow-up supervision system are crucial to the sound development of the industry.
Compared with China, the overall steady development of P2P in the United States is due to the fact that the infrastructure is well developed and can effectively control risks. Specifically, 1) there is a perfect credit information system.Improving the efficiency of risk control will help the platform to form a standardized audit and lending process. The United States has a relatively perfect credit information mechanism and has formed a credit evaluation and risk pricing system for small and medium-sized enterprises and individuals. Most P2P platforms in the United States establish a risk control system in line with their own business on the basis of FICO, such as the risk control system of banks developed by Lending Club to effectively control the risk of credit loans.2) implement the deposit and management of fundsTo realize the sharing management of customer funds and online lending information agencies' own funds, and prevent the risk of misappropriation of online lending funds. The major platforms do not undertake the function of credit intermediary, which is distinct from the lending banks.
Second, strict supervision, multi-sector coordination, 1) set a high threshold for entry, emphasize information disclosure, etc.After October 2008, P2P operation needs to apply for registration with SEC and bring it into the supervision of the securities industry. There are clear regulations on the working capital, customer capital management, credit risk management, information disclosure and other aspects of the platform.2) attach great importance to the protection of investors' rights and interests.The Federal Deposit Insurance Corporation, the Department of State-level Financial institutions and the Consumer Financial Protection Bureau work together to ensure that investors' losses are minimized when risks occur.
In addition, 1) the trading mechanism is matureIncluding borrower information review, loan cycle, transaction compensation system, centralized matchmaking system, etc., which are constantly developed and optimized in practice.2) matching the risk and return of capital assets with high transparencyUnder the information intermediary mode, the project basically corresponds to one to one, the amount is the same, and the platform has no debt. Even if there is something wrong with the platform, investors can still get the borrower's claims.
(2) the small scale and weak growth of the P2P industry in the United States reflects the defects of its business model.
First, under the highly developed financial system in the United States, the living space of P2P is narrow.The financial market in the United States is highly developed and the competition among financial institutions is fierce. Some small banks can better meet different lending needs for survival credit sinking to poor credit information groups, so they are less dependent on P2P. It is difficult for the industry to expand market share.
Second, the existing profit model of P2P has natural defects and poor sustainability, 1) the capital side.Individual investors lack the professional ability to identify the credit risk of borrowers, which is easy to follow the trend to produce herding effect. Institutional investors have a large number and strong control over the platform, which is easy to impact the survival of the platform.2) the platform naturally has moral hazard.On the one hand, the lack of regulatory platform is easy to develop into credit intermediaries, forming a pool of funds, or even self-financing, Ponzi financing and so on. On the other hand, since there has never been a major breakthrough in the profit mode, under the platform trading commission profit mode of the information intermediary model, the platform has a natural motivation for illegal operations to improve profits and attract investors, such as Lending Club managers illegally borrowing $22 million in 2016 to improve profits, 2018 Sofi platform exaggerated its loan refinancing income, customer rate of return to attract more capital, 2019 Prosper miscalculated and exaggerated platform annualized rate of return. And widely publicized by e-mail and other means.3) Asset sideTo some extent, the platform solves the problem of information asymmetry, but due to the sinking of asset-side credit, it substantially increases the financial risk.
Globally, the sustainability of the existing P2P profit model is poor, information intermediaries can not take into account the stability of funds, large-scale and low cost, as well as low bad debt rate, in order to achieve scale expansion and enhance revenue, the existing model needs to be broken through and urgently needs to be transformed. At present, foreign online loan business has appeared mode innovation attempt 1) some large-scale online loan platforms are transformed to banking business.Obtaining the advantages of banking license, such as Zopa, Lending Club, SoFi and other digital banking services, shows that the online lending platform has leading technical advantages, while the banking license has more model advantages.2) many mature banks distribute financial technology business.These include the acquisition of financial technology companies and their cooperation in the development of their own digital products, such as Citi's investment in C2FO, BlueVineand FastPay, JPMorgan Chase's investment in Prosper,LevelUp and Gopago, etc.?
4 Prospect
look into the future,On the one hand, the P2P platform in China has been completely withdrawn, and the major formal platforms have been transformed one after another. On the other hand, the current financial technology and financial innovation are developing rapidly. In the future, with the continuous improvement of financial infrastructure construction, the ability of financial supervision will continue to improve.The recent special meeting of the Financial Committee decided that "the relationship between financial development, financial stability, and financial security must be properly handled." it is expected that the regulatory attitude will also be more prudent in the future to prevent and control financial risks.
4.1 Industry level: cooperate with traditional financial institutions to carry out loan assistance business and export technology
1) supervise and guide P2P platforms to transform small loans, consumer finance and other licensed lending institutions.In practice, platforms with proprietary assets are more suitable for the transition to consumer finance, and the threshold for applying for a consumer finance license is relatively higher, and the transformation platform is less. Lufax formally settled the transformation of consumer financial institutions in April 2010. at present, only sack Wealth and PPmoney online loans are fighting for consumer finance licenses.
2) transformational loan institutionsThe head P2P platform with self-asset side and strong financial technology capability can make use of Internet technology and asset-side advantage open platform to carry out loan assistance business, and act as an information platform to reduce the risk of information asymmetry between financial institutions and borrowers. At present, the most representative is PPDAI, who has completed the withdrawal of online loan business and the transformation of loan assistance.
3) transform the integrated financial management platformCooperate with funds and banks to carry out information recommendations and services such as money fund products, public fund portfolios and equity fund portfolios, and launch asset management products of major financial institutions to form an online "product supermarket".
4.2 at the regulatory level: promote the improvement of infrastructure and strengthen the follow-up of the regulatory system
1) continue to promote the construction and improvement of the credit information system.Since 2019, the regulatory authorities have begun to expand the scope of credit investigation, including coordinating the information of the borrowers of the platform for malicious evasion and cancellation of debts into the credit information system, setting up a market-oriented personal credit information organization, "hundred banks of credit", etc., and the market-oriented credit information system has been continuously improved.
2) timely follow-up supervision and strengthen coordination in view of financial innovation.In the face of financial innovation in the future, under the general direction of macro-prudence, supervision may remain vigilant, strengthen predictions, and further improve the coordinated supervision of various departments. In addition, we should improve the statistical system of the financial market, strengthen the statistical monitoring of the weak links in risk prevention and control, and form regular supervision.
3) protect the interests of investors.Prior to the lack of overall professionalism of P2P investors, the awareness of risk control is not strong, and the idea of just exchange is strong, but in fact, most of the platforms have no risk response ability, resulting in abnormally high risks. High-risk investment should set a higher investment threshold and perfect investor asset protection mechanism to protect the interests of investors.