Ping An to fold P2P lender Lufax into new consumer finance arm: report

2 min read
(Image credit: Lufax)

Ping An Insurance has received approval from regulators to set up a consumer finance arm, a representative from its peer-to-peer (P2P) loan affiliate Lufax confirmed on Friday, in a move that is reportedly the beginning of its transition away from P2P lending amid increasingly stringent regulations.

Why it matters: Many smaller platforms have been forced to exit the P2P lending industry and larger players to shrink the size of the operation as a result of a three-year crackdown campaign.

  • Ping An-backed Lufax has been moving away from P2P lending as regulators strengthen efforts to clean up the industry to curb financial risks.
  • Earlier this week, a notice issued by the country’s internet finance regulator requires all existing P2P lending platforms to clear outstanding loans in less than a year and become small loan providers. The grace period for larger lenders can be extended by up to two years.
  • Shanghai, where the lender is based, recently introduced tougher rules to force companies to wind down their operation.

“Our associate Ping An Group has received approval from the regulators, and will proactively establish a consumer finance company in accordance with the relevant requirements.”

—a Lufax spokesman to TechNode on Friday

Details: Ping An Insurance, which owns more than 40% of Lufax, received the approval (in Chinese) from the China Banking and Insurance Regulatory Commission (CBIRC) last week.

  • The new consumer finance company will reportedly “take over” Lufax’s online lending business, according to Chinese financial news outlet Caixin, citing an unnamed source close to Ping An Insurance. The move is said to be part of Lufax’s planned restructure.

Context: The crackdown campaign against illegal and risky practices in the internet finance space has been ongoing for three years and, according to a recent central bank report from Monday, has wiped out more than two-thirds of online lending platforms in the country over the past year.

  • In August Ping An announced (in Chinese) plans to significantly scale back Lufax’s P2P lending business, to less than 20% of its business.
  • Reuters reported in July that Lufax’s P2P lending unit will be incorporated into a new department focusing on consumer finance, which will involve the company tapping into Ping An’s banking arm.
  • Other leading lending platforms including Shanghai-based Dianrong also revealed a change in strategy for its lending business to focus on services for traditional financial institutions rather than individual investors.

Updated: this story has been updated to include comments from the company.