Resigned to change
Domestic peer-to-peer (P2P) lending platforms have suffered a wave of employee resignations in recent months as the industry goes through a period of reorganization in the wake of new government regulations. Since authorities issued new regulations in February 2017, many domestic P2P lending platforms have either shut down or abandoned the business. The number of Chinese P2P lending platforms fell from 3,516 in November 2015 to 2,393 in February 2017, according to industry data. Platforms will need scale, digital capacity and "special resources" to survive the ongoing reorganization, industry insiders say.
With the rollout of new regulations in February, there has been a wave of resignations in China's peer-to-peer (P2P) lending industry, as employees worry about the prospects of the business.
"I resigned in February," said a woman surnamed Liu, a former employee at one of China's leading P2P platforms, which she refused to be named.
Liu started her career in Internet finance in October 2016. Half a year later, she worries about the industry's prospects.
"Many of my colleagues have resigned, primarily because they are concerned about the company's future," she told the Global Times on Sunday.
Recently, P2P industry employee turnover has shot up, with some workers joining larger P2P companies and some moving to other industries.
A former public relations representative at a domestic P2P platform noted that industry employees still have options, provided they get out now, according to a March 21 report on the domestic news portal 21jingji.com.
"Given that many P2P platforms are reorganizing, workers can still find good jobs if they resign right now," the representative said. "It will be hard for them to find goods jobs if their companies' business takes a turn for the worse."
The representative's former employer has cut its staff and trimmed its budget over last few months, the report said.
The wave of resignations in domestic P2P lending industry is connected to the shutdown and reorganization of many online lending platforms, said Zhou Zhihan, general manager of Kaixin Financial, China Development Bank's Internet financial platform.
The number of Chinese P2P lending platforms fell from 3,516 in November 2015 to 2,393 in February 2017, according to data from the Shanghai-based P2P lending platform wdzj.com.
Many P2P platforms have shut down because they performed poorly or were unable to comply with stricter regulations, according to a report jointly released on March 13 by wdzj.com and the Shanghai-based Internet finance institute Yingcan Advisory.
Some P2P lending platforms employed a strategy of rapid growth that left them with a swollen staff, Zhou said. When the government instituted stricter regulations over the industry, these companies had to cut the size of their business to comply.
Ongoing transformation
In August 2016, the Ministry of Industry and Information Technology (MIIT) issued new regulations for the online lending industry.
The regulations included rules for how P2P lending platforms could raise money, guarantees for lenders and requirements for selling wealth management products. The MIIT gave the platforms 12 months to comply with the regulations.
After the ministry issued the regulations, many platforms stepped up efforts to get their businesses into compliance.
Kaixin Financial files with regulators when it issues new lending products, with the goal of guaranteeing its projects in compliance with the rules, the company said in a statement sent to the Global Times on Monday.
In February, the China Banking Regulatory Commission released guidelines requiring P2P lending platforms to appoint qualified banks as custodians for their funds within six months.
Many P2P lending platforms rushed to sign agreements with banks to comply with the guidelines. By March 20, a total of 234 platforms, or about 10 percent of the industry, had announced custodial agreements with banks, Beijing-based magazine China Economic Weekly reported on Monday, citing data from wdzj.com.
Some of the smaller platforms, however, chose to shut down or get out of the P2P lending business because of the increased costs of regulations, Zhou from Kaixin Financial said. Some couldn't even meet the compliance requirements to appoint banks as custodians of their funds.
Also, the guidelines required domestic P2P lending platforms to limit the size of their loans. For example, the guidelines prohibit corporations from borrowing more than 5 million yuan ($726,500) in total from P2P lending platforms and more than 1 million yuan from any single platform.
Large P2P lending platforms that determined they couldn't make money under such limitations decided to go into other businesses.
P2P lender Hongling Capital has decided to transform itself into an investment bank, Zhou Shiping, its chairman, said at the company's shareholders' meeting on Saturday.
On March 16, Chongqing Huimin Finance Service Co, a State-owned enterprise in Southwest China's -Chongqing, announced that it will close its online lending platform lbt.cquae.com in April, according to a statement on the company's website. From May 2014, the company had raised nearly 1.5 billion yuan, said the statement. It had no defaults or overdue payments.
Mixed outlook
After going through a period of rampant growth, the Internet finance industry is entering a stage of intensive cultivation in which scale and digital capacity become crucial elements, said Zhang Shishi, CEO of New Finance Group and co-founder of Renrendai.
"Scale can lower operation costs, help recognize risks and improve the capacity to accumulate data and serve clients," he told the Global Times on Monday. "Digital capacity is conducive not only to risk management but also to economic results and the prioritization of P2P platforms' businesses."
P2P platforms with bad risk controls will die in a new round of industry reorganization, Zhang said, noting that oligopolistic competition is expected to form in the sector over the next three to five years.
With the emergence of some large online lenders, the P2P lending is likely to become more regulated and easier to supervise, Ma Jun, chief research fellow at wdzj.com, told the Global Times on Tuesday. But borrowers' bargaining power will be restricted, he added.
Domestic P2P lending platforms handled 204.3 billion yuan in transactions in February, according to the 21jingji.com report. The top 100 platforms represent 68.23 percent of the total, indicating that industry concentration is pretty high.
Given the lending cap, P2P lending platforms can satisfy only a small proportion of the country's loan demand, compared with banks, an industry insider told the Global Times on Sunday on condition of anonymity.
But Zhou from Kaixin Financial said that P2P lending platforms with special resources may embrace good development. Examples include platforms that focus on market segments such as automobile finance or e-commerce finance.
Besides, these companies can also step up efforts to develop corporate clients, Zhou said.
"They can try to introduce institutional funds, which not only helps maintain and increase the value of their assets, but also better supports the real economy by lowering fundraising costs," he noted.
