Shanghai PPDAI Financial Information Services, a Chinese P2P fintech is exploring possibilities to enter the Indian market.
A PPDAI team that included one of its founders Jack Gu and the company's chief financial officer Simon Ho met over 50 online lending startups during their India visit last week and expressed interest to enter the country. However the team is not sure how exactly they should make the foray.
“Online lending in India is just like what China was around 10 years back when we started. So, it brings in the whole feel of what we were then and we are excited”, said Jack Gu.
According to Gu, Alipay transformed the P2P industry in China as it enabled loan transactions digitally. Ho was impressed with the market in India and feels that the opportunity is huge as the market is still fragmented.
“We would like to be involved in India and are attracted to huge underserved markets. We have demonstrated capabilities in China and would like to leverage that in India,” added Ho.
Speaking about their own journey, Gu recalled that they began by ensuring the presence of a pool of borrowers on their platform. This automatically attracted lenders, he reasoned.
Later they built the credit scoring models based on an individual's data available in China. Ho stressed on the importance of their on-the-ground team.
“Though we are an online lending platform, half of our human resource is on-the-ground and collect funds from borrowers. It matters a lot on how you manage your human resource,” said Ho.
PPDAI’s automation is powered by big data and proprietary technologies where the AI matches the right borrower with the right lender.
They claim that loan match happens at every 4.1 seconds and they have data that stretches back to 11 years.
As far as India is concerned, the fintech scene is expected to develop over the next three to five years, especially in the lending space. Indian fintech companies saw investments of over USD 500 million in Q2 2018 from investors in China, USA, UK and Europe.
As per a Nasscom forecast, the Indian fintech software market is poised to touch 2.4 billion by 2020 from a current USD 1.2 billion.
Investments in fintechs globally gained traction since 2013 with the US pouring in the most investments. Investments in the Asian region also increased since 2014 significantly and more than half of the investments in 2016 in Asia can be traced back to Ant Financial investing USD 4.5 billion across several Chinese fintechs.
Despite a slowdown in Europe and the Americas, investments in the sector in the Asian region remained high.
A 2017 report published in the Journal of Chinese Economic and Foreign Trade Studies states that until 2015 the sector saw the biggest expansion in the number of platforms. Since year-end 2015 the total number of P2P lending platforms has been decreasing. Many of these platforms collapsed also because of fraudulent activities (e.g. Ponzi schemes).
"This is also the reason why stricter rules on P2P lenders were imposed in 2016. Although the outstanding balance of P2P lenders is still increasing, the average yield of P2P loans is decreasing significantly,” the report states.
Founded in June 2007, PPDAI is China’s first network credit lending platform headquartered in Shanghai. As of April 2017, PPDAI platform had 4 million registered users allowing it to occupy a leading position in the industry in brand influence, number of users and platform trading volume.
PPDAI’s investors include Sequoia Capital, Lightspeed China Partners, Legend Capital among others. PPDAI has raised a total of USD 66.5 million and is registered in New York Stock Exchange (NYSE) in November 2017.