China's consumer finance market tipped to grow

China’s consumer finance market is expected to grow this year after experiencing difficulties in 2018 as the overall capital and credit environment will be more favorable.

Zhao Guoqing, founder and chief executive officer of Mashang Consumer Finance Co, a Chongqing-based consumer credit service provider, said companies offering consumer financial services might find it easier to match their assets and liabilities in 2019 as funds will be abundant in the market.

The government’s efforts in speeding up data interconnections are also believed to be conducive to consumer finance firms, which rely on data to evaluate their clients’ creditworthiness.

Data showed that the consumer finance sector in the world’s second-largest economy had reached 8.45 trillion yuan (US$1.26 trillion) by the end of October in 2018. The number is projected to hit 10 trillion yuan by 2020.

This year, people will spend more on practical services like education and training rather than durables such as cars and mobile phones — a trend not gone unnoticed by companies like Mashang.

Consumer finance industry is intrinsically correlated with and dependent on technologies, Zhao said.

To tap this potential market, Mashang Consumer Finance said they will spend big on developing advanced technologies and hope to increase its research and development headcount from around 900 in 2018 to over 1,200 this year.

Zhao said they will pursue a unique growth path in the future by integrating “artificial intelligence technology, scenarios and credit” and will let technologies lead the direction of their business expansions.

At the industry level, compliance and risk management will remain the top priorities for consumer finance companies.

The past year was tough for the industry players, as Beijing carried on deleveraging campaigns and regulators tightened supervisions on the booming sector, Zhao said.

Consequently, fewer participants are operating now, while people’s appetite for grand spending is likely to come down, given the country’s downward economic outlook.

The State Council, or China’s Cabinet, issued a statement in September 2018 to encourage innovations in the consumer finance sector while calling for more standardized business practices.

Founded in 2015, Mashang Consumer Finance has over 60 million users and has helped 5 million consumers to establish their credit records.