The strict regulatory environment in China is pushing several homegrown fintech and P2P lending companies to look for more lenient jurisdictions in Southeast Asia.
China’s crackdown leads to an ouster
In the past year, Chinese authorities have cracked down on risky financial practices in the country. Consequently, over 50% of Chinese P2P lending platforms were wiped out and only 900 out of 1900 such businesses survived the year of rampant regulatory activity. Now, the surviving businesses want to cut their losses and exit the mainland instead of complying with the strict oversight of the government. Their next stop could be the Southeast Asian market and neighboring countries like India.
Talking to TechNode, Johan Uddman, a fintech consulting partner at Den Digitala Draken, a Shanghai-based think tank, said that it is wise for P2P lending platforms to look at foreign markets. Growth has only started to take off in these markets, and Chinese platforms could leverage their capital, experience, and technology here.
Earlier this month, Indian media outlet Economic Times reported that Chinese P2P companies like CashBUS, 9F Group, and WeShare were looking for opportunities to invest in the country’s growing online lending sector.
Serving the underserved
Southeast Asia could be a big opportunity for sustainable growth for P2P lenders. The customers in these spaces are often underserved and have limited access to loans. Regulations in these countries also lack clarity, unlike China, which is hawkish on the sector.
Co-founder and CEO of Lendbox, a P2P lending platform, Bhuvan Rustagi said that the Indian market is credit-starved and has an unserved retail investor base too. A high-volume Chinese player could leverage these conditions and get a firmer footing in the market.
He noted that while Chinese companies want to invest in Indian fintech companies or create their own platforms in the country, they are adopting a more cautious approach due to lack of regulatory clarity. For now, the approach seems to be investing in existing Indian platforms rather than entering the market full-fledged.
The Southeast Asian market resembles the Chinese P2P lending market of 2011 when a tech-savvy userbase and a fast-growing economy led to broad fintech adoption. Informal lending platforms also thrive because traditional financial services are still not accessible or viable for many users. An informal, peer-to-peer lending platform makes use of the consumer’s growing comfort with fintech and their need for faster, better, and more adequate access to credit.