Crazy Fintech In China

Vladislav Solodkiy, managing partner at Life.SREDA VC

Chinese fintechs are very strong in terms of execution and distribution (but only inside China, to be honest), and not so advanced in product and technology innovations. Sometimes striving to be “trendier”, they end up being “too innovative”: they peek in bathrooms in order to assess credit risks; they introduce payments by head nodding; they settle payment obligations to investors with bottles of spirits; they accept nude female photos as collateral, as well as publicly flog for poor performance.

Two days ago, The New York Times wrote: “one upstart lender, China Rapid Finance, supplements data analysis wit
h on-the-ground spade work. The company’s investigators, in more than 90 cities, check for the number of toothbrushes or towels to determine how many people are living in a house. They look for dirty dishes in the kitchen. They take photos of a potential borrower at work to confirm employment status.” Lenders have to be creative (and look after their bathrooms), as cash reigns, fraud is rife and even the most basic details can be difficult to verify. Online lending in China still has a Wild West aspect – for both the lender and the borrower.

Reuters reported yesterday that Alibaba Group Holdings’ finance arm “demonstrated a payment service that will allow virtual reality shoppers to pay for things in future just by nodding their heads.” The VR payment technology means people using virtual reality goggles to browse virtual reality shopping malls will be able to pay for purchases without taking off their goggles. They can just nod or look instead.

In the recent “Money of the future” report by Life.SREDA VC, you can find more examples of Chinese fintech innovations. One of them is a peer-to-peer lending website Chinatou.com experiencing a liquidity crunch, which said it would settle all payment obligations to investors with bottles of an expensive Chinese liquor called Baijiu. As of May 15, Chinatou.com owed 230 million yuan to 1,850 investors, according to the data from their website. 230 million yuan, or about US$35 million, will buy an awful lot of hooch.

The following “innovation” was introduced in the southern province of Guangdong in China, where female college students were told to hand over nude photos of themselves holding their ID cards, with lenders threatening to make them public if they failed to repay their microloans. While these loans were brokered on Jiedaibao (raised $380M at $7.8B valuation), the P2P online lending platform denied direct involvement as the two parties subsequently agreed terms over another channel. Blackmailing with nude photos joins a long list of threats including property destruction and bodily injury committed by loan sharks attempting to collect unpaid loans.

Chinese banks try to compete with fintechs, but not in terms of technology innovations. A video has surfaced online showing staff at a Chinese bank being publicly spanked for poor performance during a training session, sparking outrage. The video, first posted by the People’s Daily, shows a trainer asking eight employees why they did not “exceed themselves” at training. He then spanks them with what looks like a stick. Reports say he later also cut and shaved their hair. Two executives at the bank have been suspended. The incident took place at a training session for more than 200 employees at Changzhi Zhangze Rural Commercial Bank in northern China.

The abovementioned is not «as good as» the yesterday news about another company in China, which allegedly makes their female workers kiss their boss on the lips every day before they start work.

I think, that Chinese fintechs do not need to innovate only for innovation (processes-for-processes, even sometimes their results look odd) or reinvent the wheel. For example, challenger- and neo- banks from Europe, which numbers growing very fast, can be useful for Asian e-wallets as potential acquisition to compete with PayPal and ApplePay in terms of quality of their products, new features, and geographical expansion. The same in other verticals of fintech.