Contents › attached › Research_Report_Jiayin_Group_Inc.pdfThe small loans, those between 3,000...

CapitalWatch Research - Jiayin Group Inc (Niwodai)2

Contents

Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

I. China’s Online Lending Industry . . . . . . . . . . . . . . . . . . . . . . . 3

A. General Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

B. Systemic Credit Reporting Issues . . . . . . . . . . . . . . . . . . . . . 4

C. Multi-layered Lending Market . . . . . . . . . . . . . . . . . . . . . . . . 5

D. Growing Investment Opportunities . . . . . . . . . . . . . . . . . . . . 6

E. Changing Regulatory Environment . . . . . . . . . . . . . . . . . . . . 7

F. Industry Reshuffle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

II. Jiayin Group Inc. (Niwodai). . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

A. A Portrait of Niwodai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

B. Long Operating History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

C. Growth Amid Market Uncertainties . . . . . . . . . . . . . . . . . . . . 12

D. Industry Position and Reputation. . . . . . . . . . . . . . . . . . . . . . 14

E. Comparable Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

F. Risk Forecast and Management . . . . . . . . . . . . . . . . . . . . . . 16

G. Media Coverage and Interaction . . . . . . . . . . . . . . . . . . . . . . 16

H. CEO Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

I. Industry Insider’s Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Jiayin Group Inc. (Niwodai)

Sector: Financial Services

Industry: Credit Services

Sub-Industry: Consumer Finance

IR Contacts

In China:

Ms. Bei Bai

Email: [email protected]

Tel: 021–61908020

In the United States:

Mr. Peter H Frank

Email: [email protected]

Tel: +1–650–799–2826

Capi ta lWatch Research and/o r one o f i t s a f f i l i a t es does a n d s e e k s t o d o b u s i n e s s with companies covered in its research reports. As a result, investors should be aware that the f i rm may have a conf l ic t o f i n te res t tha t cou ld a f fec t the object iv i ty of th is report . Investors should consider this report as only a single factor in making their investment decision.

CapitalWatch Research - Jiayin Group Inc (Niwodai) 3

Forward

This report is the outcome of a one-month-long investigation, research, and analysis of Jiayin Group Inc., or known as Niwodai, and China’s online lending industry by 25 professional journalists and analysts from JinPing Media Group across its Beijing, San Francisco and New York offices. It differentiates from investment banks’ reports by focusing on media reports and providing analysis from media perspectives. It collects and isolates relevant information from a large number of media reports on Niwodai and China’s online lending industry, conducts analysis through investigations, verifies the information’s authenticity from multiple channels, and analyzes data from unique media perspectives. We hope this report will provide you with sufficient and reliable information to understand Niwodai and serve as an important factor for you to make investment decisions.

I. Online Lending Industry

A) General Introduction

China has experienced rapid growth in the consumer finance market in recent years. Having emerged in 2006, the consumer lending market grew to dominance in 2009. Currently, the market is estimated to be growing at more than 18% compound annual growth rate (CAGR). According to estimates, the outstanding loan balance of the consumer finance market in China will grow from slightly more than $500 billion at year-end 2014 to a projected $1.7 trillion by year-end 2020.

Because of a general inef fect iveness of t radi t ional f inancial institutions, consumers seeking consumer finance options have typically needed to search for alternative methods of funding. The resulting low penetration by traditional lenders into the consumer f inance market has created large opportunit ies for investment platforms. Thanks to artif icial intell igence capabilit ies and Big Data analytics, new companies are able to deliver a superior user experience with an easier loan application process, efficient approval decisioning, and rapid fund remittance. These new companies are also adept at risk assessment and pricing differentiation.

Among the key drivers that is behind the rapid adoption rate of online platforms for financing and investing is the growing penetration of mobile internet capabilities in China. With a growing selection of mobile applications that serve various aspects of life in China, combined with an increasing number of mobile-savvy users, mobile applications for borrowing and lending have become prevalent options throughout the population. Indeed, the volume of third-party payments is expected to grow to more than $85 trillion in 2021, representing a fivefold increase from 2016.

Thanks to these popular and convenient mobile applications with a varied assortment of products, attractive rates of return, and simplified pricing options, these peer-to-peer (P2P) platforms have become increasingly and rapidly popular among investors.


Defined as a market that provides personal loans to consumers, including credit cards, cash advance, online credit offerings, and other consumer finance products, the sector typically excludes mortgages and auto loans.

2015 2016 2017 2018 2019 2020 2021 2022

112

0

50

100

150

200

250

300

74

144

182

227

256

# Borrowers for Online Loans (millions)

Source: Oliver Wyman Report

Despite this rapid growth, the market for consumer finance in China remains underdeveloped and underpenetrated. But the market is changing rapidly and remains unpredictable. According to Oliver Wyman, since 2016 approximately 2,000 lenders have gone bankrupt while about 800 companies have entered the market. There were 2,118 consumer lending platforms in China as of mid-2017.

Even with this growing desire for consumption and borrowing among the public, the consumer finance market in China remains highly underdeveloped and underpenetrated. Research has found that the ratio of China’s unsecured consumer loans to the country’s gross domestic product was just 9 percent in 2016. That compared with a ratio of 15 percent in the United States, where outstanding consumer finance loans were $7,647 per capita, more than 12 times more than in China. In addition, the average number of credit cards per person in the U.S. was 2.9, compared with just 0.3 in China.

B) Systemic Credit Reporting Issues

While much of the difference between consumer finance in China and elsewhere stems from both historical and cultural reasons, much of the disparity arises also from an underdeveloped credit infrastructure in China. Roughly 1 billion people in China, or more than 70 percent of the population, did not have credit ratings with the country’s Credit Reference Center (CRC) by year-end 2015. That compared with only 14 percent in the United States without a similar credit rating.

Although the Chinese government has attempted to enhance the nation’s credit reporting system, including setting up the CRC under the country’s central bank, the People’s Bank of China (PBOC), access to the CRC’s database has been limited to banks and other market players authorized by the CRC. In addition, despite the government involvement in supporting the system, to date, it has not developed the advanced credit scoring and reporting systems that are available elsewhere.

While this lack of a sophisticated nationwide reporting system has limited a centralized lending ecosystem, the desire for private consumption in China has skyrocketed. Between 2010 and 2015, private consumption has expanded at a CAGR of nearly 10 percent in the first five years of this decade and is expected to increase to $4.8 trillion by the end of 2020.


Much of the growth of private consumption has come about for a few reasons, including the country’s economic expansion, which increases disposable income throughout the population as well as increasing shift of population to the cities. In addition, the country has rebalanced its economy to a more consumption-driven economy, and greater mobile and online penetrations has made a wide selection of consumer goods easier and more convenient for purchase.

Still, the lending industry remains highly fragmented and disparate with the 15 largest lenders only accounting for 5 percent of total outstanding loans.

C) Multi-layered Lending Market

This consumer desire, together with the fragmented market and still lack of sophistication in a nationwide lending system has given rise to the rapid development of the online consumer finance market.

The rapid expansion of consumer finance loans has seen the arrival of four fundamentally different types of loans based on size, duration, and nature of borrower and borrowing terms.

The largest of the loans, those with principal borrowings generally above 140,000 yuan (≈$20,000), are typical ly used to f inance business needs and are often secured with collateral.

Medium-sized loans generally refer to loans with principal amounts between 20,000 yuan (≈$3,000) and 140,000 yuan (≈$20,000). These loans are often used for larger consumption-type purchases and have a typical duration of between 12 and 36 months.

The small loans, those between 3,000 yuan (≈$450) and 20,000 yuan (≈$3,000) typically take the place of credit card loans for young professionals and other consumers who often are unable to receive credit approvals by the larger banks. These loans are typically used to purchase small electronic items or durable household goods and have a repayment term of between three and 12 months.

Online Consumption Loans (RMB billions)

0

2,000

4,000

6,000

8,000

10,000

12,000

2015 2016 2017 2018 2019 2020 2021 20222015 2016 2017 2018 2019 2020 2021 2022

1,1442,144

3,526

5,309

7,451

10,021

Source: Oliver Wyman Report


The smallest pool of loans is referred to as payday lending. Like in other parts of the world, payday loans in China are intended to help consumers afford urgent items for daily necessities. These loans, typically less than 3,000 yuan (≈$450) have repayment terms of less than 30 days and are fundamentally meant to be repaid from the consumers next paycheck.

Each of these types of loans has grown rapidly in recent years as the financing needs of China’s middle class have been severely underserved. Historically, the country’s lending market has been over ly dominated by banks, which, according to the PBOC, accounted for 82 percent of all assets in the financial sector in China as of 2017. Indeed, 60 percent of the loan balances for the largest five commercial banks in China represented lending to corporate customers.

Not only have banks focused on commercial lending rather than consumer lending because of systemic challenges with credit reporting, regulatory requirements regarding nonperforming loans and other capital levels has meant banks have no incentive to change their lending structures. Personal loans and lending to small- and medium-sized enterprises have not been made a priority. Further, caps and limits on interest rate pricing has meant that banks are often unable to reflect the full cost of risk for lending in the unsecured environment.

D) Growing Investment Opportunities

At the same time as this growing desire for consumer lending, thanks to an expanding economy and increasing middle class wealth, a huge underserved demand has arisen for new investment opportunities as China experiences a growing affluent investor base. This newly burgeoning population, with higher levels of disposable income, is expected to see its investable assets balloon at a CAGR of more than 11 percent in the five years to 2011 with eventual overall assets amounting to more than $30 trillion. Historically, the Chinese population has a high savings rate, with 54 percent of personal assets in China held in deposits. In the U.S., that savings accounted for just 12 percent. With low investment returns in recent years in institutional deposit accounts, a significant opportunity arose in recent years for additional investment products and wealth management services.

This increasing desire of Chinese investors for investments with a higher rate of return coincided dramatically with the shift in the country’s economy from more traditional industries and business models to a burgeoning digital economy. New retail and online consumer finance marketplaces began to be created and eventually f lourished. With the number of internet users in China in 2017 surpassing 750 million and the number of mobile internet users reaching 724 million, those figures are expected to exceed 1 billion by 2022. Overall internet penetration should hit 75 percent that year with mobile internet usage not far behind. Thanks to this ability to match supply and demand in an efficient and cost-effective way, individual borrowers have been able to borrow directly from online individual finance platforms rather than being forced to rely on traditional brick-and-mortar financial institutions, which were often unwilling to make loans.

By 2017, there were more than 15 million online investors in this online lending marketplace with more than 10 million borrowers.


Looking ahead, the overall balance of consumer finance in the market in China is expected to reach nearly $3 trill ion by 2021, more than triple the level in 2016. These loans consist of both personal consumption loans and credit card loans, which include both installment and cash advances. Each of these are expected to increase in the years ahead.

E) Changing Regulatory Environment

Among the challenges of the consumer lending P2P industry is the uncertainty surrounding the laws and regulations governing the industry. Because of the relatively short history of the online lending service industry in China, government regulators have made significant changes in recent years and are likely to continue to evolve in their oversight and requirements.

In July 2015, for example, the China Banking Regulatory Commission (CBRC), which was the predecessor of the newly established China Banking and Insurance Regulatory Commission in Apri l 2018, joined with nine other regulatory agencies to issue a series of policy measures applicable to what was called “the online lending information intermediary service industry.” These were titled the Guidelines on Promoting the Healthy Development of Online Finance Industry, or commonly called simply “the Guidelines.”

The Guidelines formally introduced for the first time the regulatory framework and basic principles for administering the online lending information intermediary service industry in China. Then, based on the core principles of the Guidelines, the CBRC and three other regulatory agencies a year later jointly issued the Interim Measures on Administration of Business Activities of Online Lending Information Intermediaries, or the Interim Measures.

Each of these measures stipulated how these companies should carry out their services and file a record of transactions. Filings were typically to be made to financial regulatory departments local to where the companies were registered.

0

5

10

15

20

25

2016 2017 2018 2019 2020 2021

OUTSTANDING LOANS IN CONSUMERFINANCE MARKET (RMB TRILLIONS)

Personal consumptionCredit cards

Source: CBRC, PBOC, CEIC, WIND, wdzj.com, Oliver Wyman estimation


Also, in November 2016, addi t ional steps were taken based on the Interim Measures to outl ine the rules, procedures, and documents required for the record-filing of online lending information intermediaries. However, many details pertaining to rules and procedures were yet to be formulated and issued.

By December 2017, the Off ice of Leading Group on Special Recti f ication of Risks in the Online Lending, the regulator for administration and supervision on the nationwide Internet finance and online lending, issued additional guidance and clarification on several matters regarding record-filing and other requirements and services.

In general, cash loan lenders were prohibited from conducting lending a business without the approval of regulatory departments or grant ing loans whose lending rate v iolated the regulatory requirement. Further, companies could not collect claims in violent ways, grant loans to borrowers without income, or illegally obtain, sell or disclose private information. In addition, the guidelines also set restrictions on a number of other business practices involving loans, repayments, and pricing. As part of this expanded oversight, major online consumer finance marketplaces were also required to register before the end of April 2018 and the rest before the end of June 2018.

It is expected that this tightening of regulation is likely to have a significant impact on the industry both in the short term and in the long term. It is likely to force many platforms with questionable operations to be pushed out of business. This, in turn, would result in considerable consolidation within the industry.

Consumer finance platforms with well-established risk management systems, however, and more stringent compliance practice should be less affected. These more substantial and better regarded operat ions are expected to attract investors from unqual i f ied platforms. With more standardized operating practices and stringent guidelines removing unqualified players, it is estimated that such market consolidation will provide larger established players with the opportunity to solidify their market presence. The overall impact on the industry would be positive in the long term and supportive of a better and healthier future growth.

F) Industry Reshuffle is Good News for Platforms with Sound Business Practices

The industry in general is marching along a healthier path, but individual platforms like Niwodai have suffered slightly in the second and third quarter of 2018 as delayed P2P platform registrations extended the loan balance cap.

Apart from mandatory platform registrations, different district-level financial bureaus recently rolled out a tougher reform on all P2P platforms’ risk compliance to ease a growing panic among investors.


This industry reform involves three major steps. First, all platforms have to complete a P2P Compliance Self-Inspection Report and submit it to the bureau by the end of October. Then, companies will be inspected by its local Internet Finance Industry Association, a non-state association. This will be followed by verification of inspection results by district-level Municipal Bureau of Financial Work with field inspection and a possible final check by higher-level government organizations.

Under tighter regulatory environment, many small-scale P2P lending platforms have reported problems and over hundreds of fraudulent lenders collapsed overnight, leaving their investors crying and protesting in the street.

Stories have been circulating across major Chinese social media platforms about desperate investors committing suicide or chanting the Chinese national anthem to pressure authorities to take action.

The following chart shows the number of existing platforms by month over the past three years. More than 60% of the platforms that existed in the beginning of 2016 have now collapsed or have had difficulty paying off investors. As of October this year, only 1,239 P2P lending platforms are still operating normally, and the number is expected to shrink further as the industrial wide shakeout continues.

Year 2018

Jan

2168

2516

3400

Feb

2104

2472

3328

Mar

2034

2433

3318

Apr

1959

2381

3295

May

1897

2351

3205

Jun

1788

2335

3132

Jul

1503

2325

3035

Aug

1350

2335

2877

Sep

1284

2315

2801

Oct

1239

2168

2104

2034

1959

1897

1788

1503

1350

1284

1239

2273

2715

Nov

2268

2635

Dec

2236

2516

2472

2433

2381

2351

2335

2325

2335

2315

2273

2268

2236

2566

Year 2017

Year 2016

Year 2018 Year 2017 Year 2016

THE NUMBER OF EXISTING PLATFORMS BY MONTH

3400

3328

3318

3295

3205

3132

3035

2877

2801

2715

2635

2566

Source: Home of Online Lending, Graphics by CapitalWatch Research


Although investors have been growing more pessimistic about the P2P lending industry in general, we still believe that this recent industry-wide meltdown was beneficial for mature platforms like Niwodai. As investors became more cautious when they selected platforms, bigger names with a longer operating history will be their top picks, rather than smaller platforms with higher rates.

This industry reshuffle is good news for P2P platforms with sound business practices, because enhanced regulatory clari ty and consolidation, along with platform’s improved risk control system could eventually clear the market uncertainties and help recovery in investor sentiment.

Niwodai has a long operating history and strong brand recognition, specially within Shanghai and nearby areas. The company has been researching and developing proprietary and reliable credit assessment models based on a highly secure and systematic platform.

Among the $2.2 billion investment volume facilitated by Niwodai in the first six months of 2018, nearly 96 percent was contributed by repeat investors who had successfully invested on its marketplace before. With all this data in hand, Niwodai builds its risk assessment model based on first-hand and proprietary user and transaction data generated from its own loan process as well as multiple layers of background and behavioral data from more than 10 third-party sources.

To supplement its risk management efforts, Niwodai also selectively collaborates with third-party expert consultants with strong credit assessment capabilities to help further screen and re-assess the creditworthiness of applicants and identify creditworthy potential borrowers based on desensitized user data.


II. Jiayin Group Inc. (Niwodai)

A) A Portrait of Niwodai

Niwodai has a long operating history and strong brand recognition, specially within Shanghai and nearby areas. It was one of the five earliest online lending platforms in China with consecutive and rapid growth in registered users and investment volume. Also, it is one of the most trusted platforms with general positive feedbacks from users, and has been playing a leading role in China’s online lending industry. With sound business practices and strong performance in quality control and risk management, the company’s leadership has been making concerted efforts with clear plans to navigate in the capital market.

B) Long Operating History

Niwodai was the launched in June 2011, the fifth earliest among a total of 6,424 online lending platforms in China up to October 2018. According to the feedbacks of users, the operating length is one of the factors in their decision about which platform to invest. As one of the earliest established platforms, Niwodai has been regarded as a long established and a big platform by users. The longer operating history is one of the characteristics that distinguish Niwodai with other 6,419 platforms in China.

Platform Lauching Time

1 PPDAI 2007.06

2 Hongling Capital 2009.03

3 Renrendai 2010.10

4 Eloancn 2011.04

5 Niwodai 2011.06

6 Weidai 2011.07

7 Renrenjucai 2011.11

8 LU P2P 2012.01

9 Tounaer 2012.07

10 Yirendai 2012.07

10 Earliest Online Lending Platforms in China Source: Home of Online Lending, Graphics by CapitalWatch Research


C) Growth in Sales and Earnings Amid Market Uncertainties

Opportunities come with challenges. As we pointed out earlier, the number of defaulted platforms more than doubled in 2018, yet we saw huge growth for Niwodai’s sales and earnings in the first six months of this year. We believe this growth momentum could continue, as long as the macroeconomic environment remains unchanged.

According to the latest company financials, Niwodai Finance has achieved significant growth in recent periods. The increase in loan origination volume facilitated by Niwodai’s platform and improved risk management capabilities contributed to significant growth in the company’s net revenue and net profit.

Year Ended December 31, Six Months Ended June 30,2016 2017 2017 2018RMB RMB RMB RMB RMB RMB

(in thousands, except for share, per share data)

Selected Consolidated Statements of Operations

Net revenue 591,098 2,250,850 340,157 774.978 1,663,518 251,397Operating cost and expenses

Origination and servicing (143,201) (229,353) (34,661) (86,044) (186,125) (28,128)Allowance for uncollectible accounts

receivable and contract assets (125,672) (130,943) (19,789) (27,626) (161,231) (24,366)Provision for assets and liabilities from

investor assurance program (223,604) (42,463) (6,417) (1) (164,373) (24,841)Sales and marketing (467,725) (884,866) (133,724) (338,100) (448,763) (67,819)General and administrative (54,990) (95,597) (14,447) (42,934) (56,416) (8,526)Research and development (88,705) (180,967) (27,348) (74,911) (75,775) (11,450)

Total operating cost and expenses (1,103,897) (1,564,189) (236,386) (569,616) (1,092,683) (165,130)Profit (Loss) from operation (512,799) 686,661 103,771 205,362 570,835 86,267Interest income 1,454 1,922 290 1,007 812 123Other income, net 3,328 12,609 1,906 8,215 10,371 1,567

Income (Loss) before income tax (508,017) 701,192 105,967 214,584 582,018 87,957Income tax benefit (expense) 118,266 (161,647) (24,429) (49,468) (88,642) (13,396)

Net income (loss) (389,751) 539,545 81,538 165,116 493,376 74,561

Source: Company Prospectus

As shown in the income statement above, Niwodai’s net revenue, highlighted in red, more than doubled from 775.0 million yuan in the six months ended June 30, 2017, to 1.6 billion yuan ($251.4 million) in the same period in 2018.

The company’s net profit, highlighted in green, nearly tripled from 165.1 million yuan in the six months ended June 30, 2017, to 493.4 million yuan ($74.6 million) in the same period in 2018.


In the prior year, the growth was also significant. The company’s revenue grew by 280.8% from 591.1 million yuan in 2016 to 2.251 billion ($340.2 million) in 2017. Niwodai recognized net income of 539.5 million yuan ($81.5 million) in 2017, as compared with a large net loss of 389.8 million yuan in 2016.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2

28182612 2535

3857

2660

4110

5268

7807

7113

5772

Niwodai Finance Loan Origination Volume

Source: Company data, Graphics by CapitalWatch Research

As the above chart shows, the total loan volume facilitated through Niwodai’s marketplace jumped signif icantly during the end of 2017 and beginning of 2018. It was at this time that the Chinese government was seeking to tighten control over what had been a largely unregulated industry.

Given the delay in the registration process and macro uncertainties, loan volume for the second quarter this year was trending down by nearly 20% compared to the first quarter. However, we believe that this impact is temporary and will subside gradually after the government-introduced formal registration process is completed.

On the regulation front, Niwodai was among the f irst batch of platforms that submitted a self-inspection check report as required by the Shanghai district-level financial bureaus.


D) Industry Position and Reputation

There has been extensive domestic media coverage of Niwodai’s brand and industry reputation. It was ranked among the top 10 P2P companies with the best media reputation by 21 Finance Search in May 2017. This media reputation ranking is based on a wide-ranging and in-depth research and analysis of media coverage for hundreds of P2P companies in China.

In addition, the company was ranked among the top 10 P2P platforms by the Chinese Academy of Social Sciences in terms of liquidity and compliance in July 2017.

綜合排名 P2P平台綜合口碑指數

1 點融網 88.2

2 拍拍貸 87.6

3 民貸天下 86.5

4 有利網 85.9

5 愛錢進 85.5

6 PPmoney理財 83.3

7 你我貸 82.7

8 微貸網 82.7

9 人人貸 81.6

10 投哪網 81.3

11 翼龍貸 81.1

12 開鑫貸 78.8

13 麻袋理財 77.2

14 新聯在線 76.8

15 人人聚財 76.8

16 積木盒子 76.0

17 團貸網 76.0

18 宜人貸 75.3

19 鑫合滙 73.3

20 口袋理財 71.8

Top 20 P2P Platforms for Media Reputation by the 21 Finance Search

Source: Home of Finance


平台名稱序號綜合評分綜合等級信用風險流動性風險操作風險法律合規風險所在地區

宜人貸 1 83 AA- A AA- AA- AA+ 北京

陸金服 2 82 AA- A AA- BBB AA+ 上海

玖富 3 79 A+ BBB AA- A AA- 北京

拍拍貸 4 77 A+ BB AA+ BBB AA- 上海

網信普惠 5 75 A BB+ AA+ BB AA+ 北京

小牛在線 6 74 A BB A A- AA+ 深圳

開鑫金服 7 72 A- A- BB BBB AA+ 江蘇

點融網 8 72 A- BBB AA BB+ AA- 上海

團貸網 9 72 A- BBB A BBB AA- 廣東

你我貸 10 72 A- BBB A BB AA- 上海

Top 10 P2P Platforms by the Chinese Academy of Social Sciences

Source: Home of Online Lending

E) Comparable Companies

So far, there are nine P2P lending platforms that have already listed in New York, including major players like PPDAI Group Inc. and Yirendai Ltd.

Based on profitability, Niwodai Finance is among the top players in the lending industry. The following table is sorted by company net profits for 2017. Niwodai ranks fourth, after Qudian Inc. (NYSE: QD), Yirendai Ltd. (NYSE: YRD) and PPDAI Group Inc. (NYSE: PPDF). In terms of revenue, Niwodai is among the top five, with LexinFintech Holdings Ltd. (Nasdaq: LX) ahead.

Company Name Ticker Closing Price

of 1-JanClosing Price

of 6-Nov

6-Nov Mkt Cap

(in millions)IPO raised

(in millions)

Total Revenue of

2017*

Net Profit(loss) of

2017*

Qudian Inc. NYSE:QD 12.58 4.67 1540 900 715.95 324.5Yirendai Ltd. NYSE: YRD 47.58 17.45 1060 75 831.1 205.67PPDAI Group Inc. NYSE: PPDF 7.29 5.66 1700 221 581.8 162.4

Niwodai Finance Pending NA NA NA NA 340 81.5

Hexindai Inc. Nasdaq: HX 11.26 7.79 376.79 50 87.09 52.66LexinFintech Holdings Ltd. Nasdaq: LX 17.29 9.61 1590 108 837 36Golden Bull Ltd. Nasdaq: DNJR 4 (19-Mar) 6.35 93.87 7.13 6.95 -0.94Senmiao Technologies Ltd. Nasdaq: AIHS 4 (15-Mar) 4.14 107.14 12 0.38 -1.42Jianpu Technology Inc. NYSE: JT 6.5 5.73 957.85 180 216.8 -30.3China Rapid Finance Ltd. NYSE: XRF 6.27 2.49 162.84 60 92.78 -36.65

* both revenue and net incomes are in millions of U.S. dollars

Source: Thomson Reuters Eikon & Company Data, Graphics by CapitalWatch Research


F) Risk Forecast and Management

The rapidly developing P2P industry in China can be imagined as a highway full of large buses. Each P2P platform is a large bus traveling quickly along this highway. Just as careless drivers may cause serious accidents on the highway, P2P platforms without accurate forecasts and decisive adjustments may also create security crises and fail in this industry. As a participant in China’s turbulent online lending industry, Niwodai has survived the turmoil. The company’s secret is not good luck, but its ability to forecast risks accurately and make decisive adjustments accordingly.

Niwodai survives and prospers by taking three major steps to forecast and respond to risks. One is the strict screening before granting loans. Similar to the security check before vehicles depart on roads, Niwodai attaches great importance to the screening of applications before approving the loans. With the rapid growth of China’s online lending industry, as well as the accompanying turmoil, Niwodai started to get rid of the concept of “all the borrowers and lenders are clients” in 2013. Instead, it strengthened the screening process by making thorough investigations of borrowers and lenders. The high technology developed within Niwodai made absolute transparency and verification possible. This is the first step to preventing risks by imposing a strict screening of borrowers and lenders.

Also, Niwodai has been proact ive ly cooperat ing wi th banks regarding fund deposit and management to ensure money security. As the Chinese government strengthens the online lending industry regulation, many P2P platforms have collapsed or disappeared due to fund deposit and management problems. However, Niwodai not only survived but also stood out due to its proactive self-regulation. It established strategic partnerships on fund deposit and management with China Merchants Bank (Shanghai) as early as 2014. Later, it discussed cooperation with China Guangfa Bank and finally decided to work with Evergrowing Bank. Such proactive self-regulation and cooperation with banks on fund deposit and management is one of the key drivers for Niwodai’s success in forecasting and responding to risks in this industry.

Finally, Niwodai has been placing great emphasis on liquidity. Maturity mismatch is a red line for P2P platforms. However, it has long been a problem in this industry to invest funds with short maturities into long-term investment portfolios. Niwodai has taken various measures to avoid mismatches, including disclosing detailed information for each asset and making sure each loan unambiguously has a borrower and a corresponding lender. Also, it has significantly decreased offline long-term assets to avoid the mismatch risk to a large extent.

All of the above measures taken by Niwodai have proved effective in risk forecast and management, which is regarded as key to Niwodai’s survival from the challenges of China’s online lending industry.

G) Media Coverage and Interaction

As one of the leading P2P platforms in China, Niwodai has been generat ing attent ion from the public and the media in China. According to Baidu, Niwodai’s search index has been above the average since July 2014, reflecting the continued attention paid by the public.


Niwodai’s Search Index (Source: Baidu Search Index)

Regarding information distribution and media coverage, Niwodai has been far above the national average, reflecting not only the attention paid to this company by the media, but also its impressive performance and growth potential.

Niwodai’s Information Index (Source: Baidu Search Index)

Niwodai’s Media Coverage Index (Source: Baidu Search Index)

Also, deep trust from registered users toward Niwodai is evidenced by the numerous messages posted by Niwodai’s registered users on major online forums. They point to the fact that Niwodai is a large brand and can be trusted. They also give high credits to Niwodai’s efficiency in paying and processing transactions. Most of them say they enjoyed their experience with Niwodai and that they would recommend Niwodai to their friends and family members. In particular, they say that they would be long-term clients of Niwodai.


Normally, trust is difficult to be cultivated between users and P2P platforms due to the concerns about financial security and efficiency. However, there has been developed a large amount of trust from registered users toward Niwodai.

I invested in Niwodai products for more than three years now, and I wi l l cont inue to support this platform. CEO Mr. Yan is a reliable person.

Nice platform, hope it will continue to grow in the future.

T i m e l y r e p a y m e n t a n d e a s y withdrawal, I like it.

Nice experience in every aspect. I invested a lot in this platform. Hope i t can be the f i rst batch of platforms registered with the government.

Recommended by my friend. Very responsive customer service.Big platform is indeed different.

Nice platform. Have been using it for almost a year.

Nice platform. Nice experience. Easy and fast money withdrawal.


Big brand, very rel iable. Have i nves ted 200K yuan and w i l l continue.

Lots of people are using it, nice marketing, hope it will continue to grow

Hope the platform can pass the registration soon, which can make us feel much safer

Timely repayment, my money is safe.

Easy and fast money withdrawal, n ice in terests . I just invested again.

Timely repayment, I received mine the same day I requested it

Niwodai brings me happiness, just tried it for the first time. It was a very nice experience and will try again.


However, there is not always positive news about Niwodai in the media. If the Chinese word for “Niwodai” is typed into the search engine of Google, the top seven searched topics are: 1. Niwodai takes money and disappears; 2. Niwodai App; 3. Niwodai IPO; 4. How is Niwodai? 5. Niwodai forum; 6. Niwodai download; 7. Niwodai payment. If “Niwodai” is searched on Baidu, the top four searched topics are: 1. Niwodai official website; 2. Can Niwodai be trusted? 3. Niwodai interest rate; 4. Is Niwodai part of the national credit system?

From the above most-searched topics about Niwodai, it is not difficult to see that people still have concerns about financial security and their credits. Also, the general public may need more information about Niwodai, such as its official website and app, which should have been more easily found.

These most-searched topics reflect people’s concerns and doubts about Niwodai. This suggests the company should improve its media communications to respond to these issues more effectively. However, these topics also demonstrate that people are increasingly interested in Niwodai and this is a good sign for the expected long-term development of the company.

H) CEO Profile

Dinggui Yan is a different type of leader.

As the Chief Executive Officer of Niwodai, a peer-to-peer lender, he does not fit into the mold of others in the industry.

While the business itself is just a few years old, Yan is in his early 50s. A notoriously public business that relies on social and personal connections, Yan is shy and not a fan of public speaking. And though the industry is focused on financial services and lending, Yan was a research engineer for 20 years before he launched Niwodai platform.

“I am not good at speaking or selling things, and I believe good thing speaks for itself,” Yan said. “There is a saying in Chinese that goes ‘All is not gold that glitters, but gold will glitter forever.’ I believe if the product you build is useful and reliable, people will recognize it eventually.”

In a culture that most business deals are signed on the dinner table after a few bottles of good wine, Yan chooses to spend most of his time in the office working with colleagues or being home with families. He doesn’t smoke or drink.

In fact, he eats so quickly that his employees say they can never keep up with him. He usually finishes his lunch within 10 minutes and he is back in the office in 15 minutes.

As an engineering major, Yan is very good at numbers. He can easily remember Niwodai’s daily registered numbers, which is an 8-digit long number that changes every day.

In the company’s first year, Yan was not only the CEO, but also the web developer, test engineer, and product manager.


“I basically slept in the office at that time, and we all did. Several engineers and I spent all our time in the office developing the system,” said Yan. “We had no weekends for a very long time.”

Until now, he still checks all departments weekly reports and read every number carefully. And while most start-up companies are busy burning cash and securing more funding, Niwodai has never needed any external investment, because Yan is very careful about the company’s cashflow.

Mostly, though, he is known for his unusual attention and care for his employees.

In selecting new offices for the company, he made sure the new office building had a good cafeteria for employees and was close to the subway station. In fact, before he even signed the lease, he made sure to walk from the building to the nearby station and timed how long it took.

“The daily commute is always painful in Shanghai,” said Yan. “I care about all my employees and I want to make sure they can get to work easily.”

Yan also invites all employees, no matter the level, whether they are a customer service agent or the chief scientist, to talk to him directly if they have any questions.

“My office door is always open for every Niwodai employee.”

I) Industry Insider’s Opinion

Zhong Xin, a Shanghai-based partner at law firm King & Wood Mallesons

Zhong said the regulators could be introducing a central ized license scheme, barring those unable to pass the requirements from operating.

“The clean-up of the P2P sector wil l also be beneficial to the macroeconomy, because with small and dispersed loans, the platforms are naturally positioned to serve those that traditional banks might not be able to serve in the short term.”

Jianjun Li, dean of the School of Finance at the Central University of Finance and Economics.

“It seems the P2P business sector would work best in a ’market of oligarchs’, which would allow a few big P2P platforms with good credit to offer premium services. Hundreds of P2P platforms have gone out of business in the past few weeks because of a combination of reasons: tight financing, economic downturn in the real economy and the platforms’ unruly behaviors including raising funds for their own projects.“


Hu Bing, executive editor of JPM.cn

“There are only four options for all the p2p companies. First is getting listed either in Hong Kong or U.S. All the listed p2p platforms so far are safe and sound. Second option is venturing into south-east Asia. Countries like Thailand, Philippines, Indonesia and Singapore have many Chinese businessman. First batch of companies that entered into south-east Asia, like Ant Financial and Yirendai, have seen tremendous growth. Third, transition into a technology company. For example, the newly-listed company Pintec, has transformed from a lending platform to a technology and financial services provider over the years. Last and least ideal option is waiting to be bought.

“Right now, there are still more than a thousand platforms, but in the long run, only a third of these platforms, or maybe even less, will survive.”

Contents › attached › Research_Report_Jiayin_Group_Inc.pdfThe small loans, those between 3,000...

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Transcript of Contents › attached › Research_Report_Jiayin_Group_Inc.pdfThe small loans, those between 3,000...