(Chinese Version)

Editor’ Note:

As online finance, featuring Internet technology, big data and user experience is still gathering momentum, P2P online lending once again aroused heated discussion among the public. TMTpost predicts that the year 2015 will provide great opportunities for both private investors, platform operators, venture capital investors, companies in need of financing and platforms for consulting services, channel partnership, and online marketing. What will the future be? Only time could tell.

Peer-To-Peer (P2P) online lending is setting the world almost on fire, though it is already near the end of 2014. Latest statistics show that up until December 19, 2014, the total trading volume of P2P online lending in China has expanded from 87419 million RMB in 2013 to 305.7 billion RMB in 2014, signifying a rise of 250%. It is fair to say that P2P online lending has already become another popular platform in providing personalized financing services other than banks.

As online finance, featuring Internet technology, big data and user experience is still gathering momentum, P2P online lending once again aroused heated discussion among public. What will happen in this burgeoning online lending industry in the year of 2015? Here’s our prediction.

1. Upcoming regulations will revolutionize the industry

In 2014, P2P online lending was finally brought under control by China Banking Regulatory Commission (CBRC). According to Yang Xiaojun, deputy director of CBRC’s Innovation Department, CBRC is expected to announce new rules for the industry in early 2015. TMTpost predicts that only competent lenders will survive and some of them will even thrive through cooperating with traditional financial institutions and sharing user information together, while a large amount of unqualified lending platforms will be shut down one after another.

We predict that only those competent lenders will survive in the P2P online lending market in 2015.

2. He who wins the mobile market laughs last

Statistics show that in June 2014, netizens using mobile phones outnumbered those using PCs for the very first time, that is to say, more than 83.4% of Chinese people now surf the Internet through mobile phones.

Many P2P lenders are also becoming aware of this fact. Chief Technology Officer of Batiaoyu.com once said: “Those P2P lenders who fail to develop well-received apps will be driven out of the market sooner or later. Batiaoyu.com has always spared no efforts in developing products that are consumer-friendly and with appropriate security check.” No wonder, mobile phones market will be the second major battleground for all P2P online lenders.

3. Enhanced credit rating system & burgeoning big data finance

The big data era witnesses the emergence of three Internet giants BAT (namely, Baidu, Alibaba and Tencent) in China, which now have the largest number of Internet and mobile phone users in the world. It is widely held that data has become the new oil and gold mine. In the past, P2P online lending platforms in China couldn’t adequately manage risks and were in dire need of a reliable credit rating system. Some lenders once attempted to build an O2O credit system in order to better evaluate applicants’ credit.

Their efforts suggest that P2P online lenders have become aware of big data finance and are adapting themselves to this new trend. TMTpost predicts that new technologies such as cloud computing shall be developed and adopted so as to further analyze and evaluate data and create a more reliable credit rating system in 2015, since big data finance has become the must-trend of future finance industry.

 In the future, with the help of new technologies and big data, P2P online lenders will gradually build their own risk management models, and some lenders might even transform themselves into professional credit rating companies.

4. Subdivision is the ice-breaking key

In 2014, since P2P online lending industry was still immature, an enormous variety of P2P lending platforms were founded, each with its own online lending model: some acted more as lending agents (such as CreditEase), others offered cooperative models (such as MicroFortune), still others chose the ETF model (such as Batiaoyu) and Debt package model (such as jimubox.com), etc. All of them are eager to stand out of the overall 1500 newly-established online lenders.

TMTpost predicts that in the coming 2015, more lending models will come in place and the P2P lending industry will get more mature and further subdivides into several different sectors, each focusing on one specific area. Moreover, third-party vertical portals, vertical search services and Internet currency will no longer be just some dreams. For most lenders, however, they will continue with P2P models and rate applicants’ credit on an O2O basis and subdivide further into different sectors, such as medicine, environmental protection, car, auction, tourism, etc.

5. Continued growth with the help of Internet

Compared with traditional finance industry, P2P online lending will best utilize data from social media, online retailer platforms and search engines, build a database of its own and provide financial management services that are much more convenient and user-friendly.

6. Risk management ability becomes crucial

Most people tend to focus their attention on the great variety of P2P online lending models, but few have ever figured out how online lenders enhance the overall risk resistance capacity of the industry, whether it is through marketization or minimizing risks. Copying models is one thing, but managing risks is completely another.

With the introduction of new rules, some major online lenders will have to take risk management into consideration. As Internet finance is still gathering momentum, every lender should think really hard on how to provide user-friendlier apps and manage risks in an appropriate manner.

7. Getting rid of guarantors

At present, most P2P online lending platforms are lacking in appropriate risk management ability. Thus, they attract investors by acting more as a third-party guarantor. However, that comes at the expense of huge warranty fees (from 2% to 5%) and financing cost. That is to say, Chinese online lenders are going haywire and giving up the very foundation of P2P online lending. Only an industry that is free of guarantors has a future.

8. Expecting innovation

Many people regard Internet finance as a subversion of traditional finance system. What is innovation, exactly? To innovate is to subvert the existing system and figure out a new set of system. Innovation is at the core of market economy. There are mainly four aspects of innovation, namely, innovation in products, procedures, channels and also structures. Innovators in China mainly focus on the first sector but fail in the other three aspects. Were P2P online lending to survive, innovators should pay more attention to the latter three aspects.

 9. Cooperation between traditional finance institutions and P2P online lenders

While Jack Ma, a major innovator in P2P online lending industry, puts more emphasis on user experience, banks typically emphasize more on safety. Yet, in 2014, banks began to feel pressured and develop financial management products such as “Bao” series, and some banks even teamed up with online lenders and vowed to share their user data. TMTpost predicts that with the growing cooperation between banks and online lenders, the finance industry will develop much smoothly.

10. Overflowing investment

Increasing number of investors from capital market starts to invest in P2P online lending industry. What are their incentives? Some might be optimistic about the future of online lending and are looking for a piece of the big pie, others might invest in line with their own extension businesses, still others might invest solely to boost their share price. Merely in 2014, over 30 online lenders have successfully attracted venture capital. TMTpost predicts that in 2015, even more venture capital investing, merging and investment will occur in the online lending industry.

In conclusion, 2015 will be a year of great opportunities for private investors, platform operators, venture capital investors, companies in need of financing and platforms for consulting services, channel partnership, as well as online marketing. What will the future be? Only time could tell.

[The article is published and edited with authorization from the author @Annie Yue, please note reference and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at ECHO), working for TMTpost.