WeBank Co., Ltd (微众银行), incorporated in December 2014, is one of the four digital-only banks in China. Internet giant Tencent is its biggest shareholder that holds a 30% stake (the maximum limit of ownership for the largest shareholder in a private sector bank).
It is also of the first batch of private sector banks approved by Chinese authorities in 2014 when the state decided to open the state-controlled banking sector to more private players (Previously only a few banks were majority privately owned).
WeBanks’s consumer-facing products are highly dependent on Tencent, which is dominant in mobile messaging and social networking in China, for customer acquisition, marketing and data.
Weilidai, WeBank’s flagship consumer credit product, is only available on Mobile QQ and WeChat, the messaging apps operated by Tencent that have combined more than one billion active users. The broad adoption of WeChat Pay, an in-app payment service on WeChat, must have boosted conversion rate for WeBank’s consumer finance offerings on WeChat.
WeBank leverages “social data” generated from Tencent’s social platforms in credit risk modeling, apart from using traditional credit data and other types of alternative data that have been widely adopted by the online lending industry.
Like many other fintech developers in China, WeBank has largely automated the processes of credit assessment and origination, risk monitoring and customer service. Not only have the automated operations made the loan originations highly efficient that it only takes a few steps for a borrower to take out a personal loan on a mobile app but also greatly reduced operating costs. The account maintenance costs were reduced by 45% in 2018. 50% of the loans in 2018 were originated and delivered during non-working hours.
WeBank started with a personal credit product and then expanded to auto loans and business loans. Also similar to other tech-driven lending players in China, WeBank targets lower-income individuals and smaller businesses.
WeiLiDai (微粒贷), launched in May 2015, provides an unsecured revolving line of credit to pre-approved users on WeChat and Mobile QQ apps. By the end of 2016, one and a half years after its launch, more than 15 million out of over 70 million pre-approved users activated it.
By now it has pre-approved over 100 million users and made more than one trillion yuan (US$ 1400 billion) worth of loans. The outstanding loans of Weilidai surpassed RMB100 billion (US$14 billion) as of the end of 2017.
75% of WeiLiDai borrowers are working in the manufacturing or other blue-collar sectors and 79% don’t have a higher education. Over 8.2 million of them previously didn’t have a credit history. In 2018, two-thirds of the WeiLiDai customers were first-time bank loan borrowers.
The average loan size of the personal loans is RMB 8,000 (US$1140). Over 70% of the loans cost individual borrowers less than RMB 100 (US$14) in the last couple of years.
In the past October WeBank soft-launched Xiao’E Huaqian (小鹅花钱), a virtual credit card for WeChat Pay users co-developed with a few consumer finance companies. The product landed first on Tencent Video, the video streaming service of Tencent, that it supports purchases of premium subscriptions.
To expand the customer base beyond the user base of Tencent’s digital ecosystem and organic customer acquisition channels, WeBank partners with businesses from various industries, such as logistics, retail and rental housing, to extend personal and business loans.
Weichedai (微车贷), an auto loan product, was launched in 2015 on used car sales platforms.
WeiYeDai (微业贷), which provides unsecured business loans, has had a cumulated 800,000 customers since its launch at the end of 2017. Targeted at small businesses, it sees about 77% of the customers earning less than RMB10 million (US$14 million) in annual revenue. 66% of the approved customers previously didn’t have a business credit history.
WeBank’s annual non-performing loan ratios have been lower than 1%, much lower than the average rate in China’s banking sector (1.8% in 2018).
As it appears harder to attract retail or business deposits through mobile apps than established banks who have large branch networks, WeBank has been considerably dependent on the interbank market for funds. To expand the sources of funds and adopters of its technology platform, WeBank has partnered with dozens of domestic financial institutions. In 2018 WeBank raised one billion yuan in bonds backed by business loans.
As bank deposit rates are still subject to regulatory controls, there’s limited room for banks to provide competitive interest rates to attract deposits. WeBank saw a big increase in deposits in the second half of 2018 after it, together with a few other banks, rolled out a deposit product that provides a variable rate higher than the average interest rates offered by conventional commercial banks. It was unshelved a few months after launch, reportedly due to regulatory intervention, and relaunched this year with a much lower, noncompetitive interest rate.
Regulatory interventions have also a direct impact on lending rates. WeBank lowered the lending rates in the last couple of years was also reportedly due to regulatory pressure.
WeBank provides other banking services like wealth management products through banking apps. But its revenues are mainly from its lending offerings.
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References
- WeBank 2016 Annual Report
- WeBank 2017 Annual Report
- WeBank 2018 Annual Report
- Tencent 2017 Annual Report
- Press release by WeBank
- News published on WeBank official website
- Interview with Ma Zhitao, vice president of WeBank
China's Digital Economy 