Don’t blame internet finance for all of the problems in P2P lending: Jack Ma

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At the Smart China Expo in Chongqing on Monday, Jack Ma, chairman of e-commerce behemoth Alibaba, defended the internet finance industry against recent criticism brought about by the troubled P2P lending sector.

During his speech (in Chinese) at the Expo’s Big Data and Smart Technology Summit, Ma said the term “internet finance,” a term he coined several years ago, should not be lumped together with the troubled peer-to-peer (P2P) lending industry.

Why it matters: Ma, the founder of internet finance giant Ant Financial’s parent company, seeks to differentiate the startup from the P2P lending sector, which has been in regulator crosshairs. He had previously expressed concern that problems in the sector will impede the development of internet finance.

  • Ant Financial operates a host of internet finance platforms including money market fund Yu’e Bao and consumer lending units Jiebei and Huabei.

“P2P lending was not internet finance from the start. It is just an industry of illegal financing businesses that have websites. We shouldn’t blame the problems all on internet finance. Of course, internet finance still has a lot of room for improvement.” (our translation)

Jack Ma, chairman of Alibaba

Details: During his speech, Ma praised internet finance as the financial system of the 21st century and the “greatest achievement of the era,” and cautioned against outmoded approaches to regulation.

  • Not all technology innovations are high-risk, and regulation does not guarantee that it will be free of risk, said Ma. Internet finance that relies on big data for risk control is highly efficient and low-risk. “Sometimes inappropriate, closed-minded regulatory efforts are inherently high-risk,” Ma said.
  • Internet finance is capable of serving more small- and medium-sized enterprises and enables better individual access to financial services compared with the traditional finance industry, said Ma.

Context: Ma also spoke out about P2P lending at last year’s expo, saying that sooner or later the P2P lending industry would run into significant road blocks.

  • Alipay launched P2P lending platform Zhao Cai Bao in 2014, which has since turned into an investment platform.
  • Last week, the central bank released a three-year plan aiming to better regulate the fintech sector and control financial risks.
  • After virtually unchecked growth during the early years of development, the rising number of illegal platforms and scams in the P2P lending industry prompted the government in 2017 to clamp down on fraud and risky financial practices.