The Peer To Peer Lending Industry In Hong Kong – High In Potential & Competition

The Peer To Peer Lending Industry In Hong Kong – High In Potential & Competition

by December 8, 2016
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Hong Kong is a well known financial centre in Asia which serves as a gateway to China. According to one of the subsidiary Hong Kong Exchange, there are 157 licensed banks and 1280 licensed money lenders in Hong Kong.

So Much Untapped Potential For Peer To Peer Lending

The market for licensed money lenders had increased exponentially over the 5 years.

money-lending
Source: Hong Kong Growth Enterprise Market (HKGEM)

The universities of Cambridge, Sydney and Tsinghua and KPMG did a combined research on the US$102.8 billion peer to peer market in Asia. The study shows that Hong Kong is lagging behind its Asian competitors such as Korea and Singapore even as China leads the rest of Asia.

peer-to-peer-lending
Source: Cambridge University (Judge Business School)

If you look at the bright side, this means that there are a lot of room for growth in Hong Kong in the peer to peer lending space. On the not so bright side, it means that traditional moneylender will have serious competition going forward. Let us explore the peer to peer lending platforms in Hong Kong that will be providing the competition.

Competitor #1 – Best Lend

Best Lend claims to be the premier peer to peer lending platform in Hong Kong. It is a subsidiary of Hai Tong International Securities which is a prominent stock broker from mainland China. Hai Tong has more than 10 branches in Hong Kong, Macao and Singapore in addition to its 240 branches in mainland China.

bestlend
Source: Best Lend

Best Lend conducts vigorous credit rating assessment on its borrowers before deciding on the appropriate interest rates for them. They target individual borrowers and get the funds from institutional and individual investors. As the middleman, they get a cut when the transaction goes through. Their website doesn’t reveal if they earn from both sides and the minimum investment or borrowing amount.

Competitor #2 – Monexo

Monexo is an Indian competition which started in February 2015 by Mukesh Bubna to lower the interest rates after working for Citibank. Mukesh wanted to reduce the 34% interest rates that banks charge on their credit card which is one of the highest rates in Asia.

monexo
Source: Monexo

Monexo does not have any strong backing unlike Best Lend but it is more transparent. They had revealed that borrowers have to pay between 7% to 20% per annum and both borrowers and lenders are charged 1% each from Monexo. Lenders have to commit to a minimum of 6 months and HK$250,000.

They target both small businesses and individuals who need loans and they are screened and rated accordingly. Lenders can diversify their portfolio and their funds are being kept at The Hong Kong Trust company to give assurance to them.

Competitor #3 – GoLend

GoLend was started by Zoe Zhang in December 2013 after her banking career with BNP Paribas and Société Générale. GoLend is in the business of secured lending where borrowers can borrow up to 80% of their collateral value for 6 months to 10 years. The maximum loan amount per borrower is HK$100,000,000.

As usual, GoLend does due diligence on the borrowers and lenders. For the borrowers, GoLend uses the credit scoring agency, TransUnion to determine the credit worthiness of the borrowers. The difference is that GoLend insist on getting insurance for the borrowers in case anything untold happens to them.

golend
Source: GoLend

The explicit value proposition of GoLend is for the investors to diversify their assets from the volatile stock market and also for property owners to unlock the cash potential after their property had increased in value.

Competitor #4 – WeLend

WeLend was started in 2013 to provides loans online. Their parent company is WeLab which also operates the mobile lending platform WoLaiDai. The parent company had raised US$160 million in Series B funding from notable institutional investors such as Khazanah Nasional Berhad and ING Bank in January 2016.

This was on the heels of Series A funding of US$20 million from the likes of Sequoia Capital and CK Hutchison’s TOM Group in January 2015. WeLab was ranked #6 in China and #33 globally by KPMG China in 2016.

Source: WeLend

Source: WeLend

WeLend doesn’t require the borrowers to be present. All they need to do is to provide their Facebook and LinkedIn profiles. They aim to offer the lowest interest rates and fastest approval turnaround. They have their proprietary credit rating software, WeDefend, to determine the credit worthiness of their borrowers.

WeLend was also Hong Kong’s Tech Company of the Year in 2015 and had lent out more than HK$4.5 billion.

Conclusion

While Hong Kong may be lagging behind its regional peers, competition is heating up. Another notable company is MoneySq which had raised HK$200 million in June 2016 from professional investor. We might hear more of such companies going forward. As the mainland market gets saturated, it is inevitable that some large financial companies will muscle into the growing peer to peer lending industry.

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