Following Baidu’s previous attempt to crack down on Peer to Peer (P2P) lending fraud by removing lending sites from its search result, Baidu has recently indicated that it has rolled out the first batch of qualified lending firms to provide P2P lending services.
Since it first announced the clean-up of the lending sites on April 29th, Baidu has reportedly been working with relevant government agents, insurance companies and clearing houses to identify qualified P2P lending firms. Those firms are to be in compliance with two major guidelines: (1) that such firms should be members with The China Association for Payment Clearing Internet Finance Committee and (2) that such firms should be partially owned by state owned assets.
This change comes after a series of fraud cases in which firms sold financial products on Baidu and subsequently vanished into thin air with large amounts of investors’ money; the most notorious one being Wangwangdai. However, Baidu has not yet disclosed the individual names of the white-listed lending firms. It indicated that more detailed and comprehensive guidelines will be announced in mid May to cover all types of P2P lending services provided on the internet.
A few P2P lending websites have said that they received phone calls from their agents notifying them of the removal without presenting an official notice from Baidu. At the same time, those firms were required to provide further supporting documents including third party guarantees to be listed in Baidu’s search results.
It is believed that Baidu is trying to establish its self-recognized rules on P2P lending platform by leveraging its leading search engine market position. “It is very likely that further guidelines will require firms to provide information on their registered capital, it is not clear if security deposit, shareholder background, risk control and compliance programs information will be necessary.” Said Mr. Xiao Haitao, marketing director of Jinhaidai.
As a search giant, Baidu has a dominant market share in China, however in the absence of clear regulatory guidance, Baidu’s authority to establish these rules are heavily questioned by industry players, especially P2P lending companies. Among other things, they are mostly concerned that such a removal will adversely affect their market reputation. Additionally, whether such rules will demolish the nature of private lending by introducing state owned firms, remains debatable.