Ant Group’s “buy now, pay later” consumer lending business Huabei is now part of the credit system of the People’s Bank of China (PBOC), as a consequence of the unbundling of the Alipay super app and Chinese authorities taking control of customers’ financial data accumulated by major fintech firms.
The information that Huabei channels to PBOC includes all account registration dates, credit limits, and repayment records, according to a statement issued by Huabei on Weibo on Wednesday. Users say that they must consent to the data-sharing procedure in order to access Huabei’s features.
Some users are concerned about the impact of this credit data on other lending activity that was previously processed separately, like loan applications at banks. Prior to the current arrangement, Alipay processed user data from its payment apps and Alibaba’s e-commerce platforms to issue credit scores and small loans. Overdue payments would only affect lending credit processing within Alibaba’s constellation of apps.
Huabei began sharing credit data with PBOC in 2020, according to a report by Shanghai Securities News. However, this only covered a portion of its user base rather than all users. Jiebei, Ant Group’s small loan provider platform, has been linked with the central bank’s credit system since 2017.
“Under normal circumstances and with punctual repayments, the use of other financial services, including loan applications, will not be affected,” Huabei said in its Weibo statement. It will submit credit data to the central bank on a monthly basis, but will not disclose details of individual users’ consumption, the platform said.
“Our data shows that more than 99% of Huabei users have good credit records. We recommend users to continue to use Huabei within the scope of personal limits,” Huabei said.
Chinese regulators have ordered Ant Group to split off its consumer lending businesses, including Huabei and Jiebei, from its core fintech offering. Huabei and Jiebei are not part of a credit-scoring joint venture that is partially state-owned. These services will also have their own apps.
Alipay has more than 1.2 billion users, while Huabei and Jiebei share 500 million users, according to the company’s latest data.
Ant Group’s prospectus that was submitted to the Shanghai Stock Exchange ahead of its scuttled IPO indicates that its credit business, which encapsulates Huabei and Jiebei, has been the company’s most profitable vertical in recent years. In the first half of 2o20, this line of business raked in RMB 28.58 billion (USD 4.4 billion), accounting for 39% of the company’s revenue in that period.
As of the end of June 2020, the total sum borrowed by users through Ant’s lending services was RMB 1.73 trillion (USD 270 billion). Only 2% of that amount was funded using Ant’s own cash, 10% was funded by asset-backed securities, and the remaining 88% was funded by banks and trust companies.
This financing structure caused alarm in China’s regulators, which interfered to halt Ant Group’s IPO and implement stricter oversight.