Caixin
Mar 31, 2021 08:17 PM
FINANCE

Didi Chuxing Drives Deeper Into Consumer Finance

Didi’s investment will give the ride-hailing giant access to BHCF’s consumer finance license, potentially allowing it to expand its online lending business. Photo: VCG
Didi’s investment will give the ride-hailing giant access to BHCF’s consumer finance license, potentially allowing it to expand its online lending business. Photo: VCG

Ride-hailing giant Didi Chuxing Technology Co. Ltd. has won regulatory approval to take an equity stake in a consumer finance company, a move that could help the firm deepen its footprint in the fintech sector.

Dirun (Tianjin) Technology Co. Ltd. (迪润(天津)科技有限公司), a wholly owned subsidiary of Didi, has been given the go-ahead to invest in Bank of Hangzhou Consumer Finance Co. Ltd. (BHCF) by subscribing for 853.9 million new shares, according to a statement (link in Chinese) released Friday by the Zhejiang bureau of the China Banking and Insurance Regulatory Commission (CBIRC). No details were given about the value of the investment, although the statement said the registered capital of the consumer finance firm will rise to 2.6 billion yuan ($395.4 million) from 1.3 billion yuan.

Upon completion of the deal, Dirun will become BHCF’s second-largest shareholder with 33.3% of the venture’s equity. Bank of Hangzhou Co. Ltd. (600926.SH) will remain the largest shareholder although its stake will fall to 35.1% from 41.7%.

The investment will give Didi access to BHCF’s consumer finance license, potentially allowing the ride-hailing group to expand its online lending business. Pushing financial services, especially loans, has become an important growth driver for internet and tech giants as they look to leverage their huge customer base to generate more revenue and profit as expansion in their core businesses slows.

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Didi has been seeking to increase its exposure to financial services for some time. In August 2019, local media reported that the Beijing-based company planned to apply for a banking license to set up a private bank in the neighboring city of Tianjin, although it denied the reports.

The company already has licenses to conduct online microlending, online payments, and insurance business on its mobile app, which has more than 400 million monthly active users. Its consumer lending service, “Dripping Water Loan,” offers a borrowing limit of 200,000 yuan with a daily interest rate as low as 0.02%, information provided on the app shows. Didi runs the service with business partners who provide part of the financing, including Merchants Union Consumer Finance Co. Ltd., Mashang Consumer Finance Co. Ltd. and BHCF.

The CBIRC has approved licenses for more than two dozen consumer finance firms, mostly controlled by banks although fintech giant Ant Group Co. Ltd. and Ping An Insurance (Group) Co. of China Ltd. have also set up operations. In December, China introduced a scoring system to better assess consumer finance companies’ capacity to manage their corporate governance, risk, capital and information technology, in an effort to tighten oversight of the sector that has attracted tech giants and financial conglomerates.

BHCF’s business has grown rapidly since it was established in December 2015. The consumer finance firm turned profitable in 2018 and reported earnings of 93 million yuan in the first half of 2020, Bank of Hangzhou’s interim earnings report (link in Chinese) last year shows. At the end of June, the company had total assets of 17.3 billion yuan and net assets of 1.8 billion yuan.

Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Nerys Avery (nerysavery@caixin.com)

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