China's consumer finance 'a largely untapped market': Lexin

China’s consumer finance remains a largely untapped market despite rising domestic consumption, according to LexinFintech Holdings Ltd, a Shenzhen-based online consumer finance platform for educated young adults.

Mizuho Bank predicts that China’s retail sales will overtake that of the US and hit US$5.8 trillion in 2018, making it the world's largest consumer market.

China is increasingly looking to make consumption the driving force of economic growth, in addition to the traditional engines of investment and export.

However, a substantial number of people have been underserved by traditional financial institutions, which lack relevant information to make credit assessments and offer financial products to cater to individuals’ credit needs.

Data from market research firm Oliver Wyman shows that the overall total of unsecured consumer loans in China accounted for only 9 percent of its domestic gross product in 2016, compared with 15 percent in the US during the same period.

This creates a big opportunity for consumer finance service providers, who can play a part in stimulating domestic demand by helping consumers enhance their purchasing power and ability to pay, said Xiao Wenjie, the chief executive officer of Lexin.

To tap the underserved market, Xiao said his company will work with conventional financial institutions to combine both sides’ advantages.

Financial technology companies have the expertise in product operations and risk management, while traditional financial players have licenses to provide relevant services with abundant funding, Lexin said.

As of the end of March 2018, Lexin has 26.4 million registered users, almost doubling from a year earlier, while users with a line of credit grew 64 percent to reach 8.2 million over the same period.