Ant is changing the way consumers borrow money from its app

In December 2020, Beijing submitted a directive to Ant Group to “reform” its business after the cancellation of its IPO, which could have been the largest initial public offering in history. In the plan, regulators asked Ant to reform its lending business, among other changes, which would subject them to a similar set of rules governing financial institutions. In other words, Ant can no longer confront its freewheeling practices by calling itself a “tech” company.

Almost a year later, the Alibaba-affiliated fintech powerhouse showed it was nearly complete restructuring its popular consumer loan products.

According to the company’s prospectus filed last year, credit products contributed nearly 40% of Ant’s revenue for the six-month period ended June 2020. The two main products are Huabei (Spend), launched in 2014 for daily consumer spending, which acts as a virtual credit card. A year later, GBei (loans) was introduced as a credit product for large consumer transactions.

In the older model, Ant created loans that were then taken out by third-party banks and other financial institutions. As of June 2020, approximately 98% of Ant’s credit balance from its platform was underwritten or securitized by its partner financial institutions, according to the company’s prospectus.

Jibei has split into two brands, users reported earlier this week. The line of credit from third-party banks is now called Xinyong Dai (credit loan) on Ant’s flagship financial services application, Alipay. Provided by Ant’s consumer finance company, which was recently formed at the behest of regulators, remains under the Jibei brand.

Huabei has also launched a restructuring that will show users which loans are given independently by banks and which by Ant’s consumer finance company. Huabei will focus on “low-cost” daily transactions, he said in a Weibo article.

“As a result of brand differentiation, users applying for credit loan services will be more aware of their credit providers to avoid brand confusion.”

Huabei also noted that it now stores consumer credit information in a database overseen by China’s central bank. He started the routine in September after founding his consumer credit company, which, like banks, must report their credit information to the central bank in China.