Operation and development of cash loan products

After being exposed to cash loans for some time, I always have the urge to write something. Although I see a lot of content about this on Renren, I still can't help but want to share the experience I have gained during this period. While satisfying my personal vanity, I hope it will be of some help to friends who are about to enter the industry or want to learn more about this. If there is anything inappropriate in the sharing, please point it out.

1. Understand cash loans

1. Background and Development

Cash loan refers to a form of lending in which cash is provided directly to borrowers. Its characteristics are "no scenario support, no designated purpose, no customer group restriction, and no collateral." The financial industry generally classifies cash loans as a category of consumer finance.

In the domestic market, it started with P2P in 2007 and then grew explosively until e-Rongbao was investigated in 2015 for suspected illegal self-financing.

Since then, a large number of P2P online lending platforms and venture investors have turned to the cash loan market, and 2016 is also recognized as the first year of the cash loan explosion. After 2017, as regulatory authorities raised lending qualifications and restricted the issuance of online micro-loan licenses, the industry entered the regulatory era.

2. Cash loan participants

The main ones include regulatory agencies, cash loan platforms, funding parties and third-party companies:

• Regulatory agencies include banks, the China Banking Regulatory Commission, the Ministry of Industry and Information Technology, and financial associations, etc. They supervise the market through the establishment and improvement of systems;
• Cash loan platforms are the main entities that carry out cash loan business, including banks, consumer finance companies, small loan companies or Internet companies. To lend money here, you need a financial license. Currently, the country is tightening the issuance of licenses;
• The funding source can be the cash loan platform’s own funds, or it can be an external consumer finance company, bank or other institution;
• Third-party companies include marketing companies that provide traffic to acquire customers, big data or credit reporting companies that provide data and risk control outputs, payment platforms that provide third-party payment services, collection companies that provide post-loan collection, and software development companies that provide a complete set of software solutions.

3. Target Users

The target users are customers with short-term funding needs. Some customers are in urgent need of funds, but have very limited financing channels and are willing to pay high interest rates; some customers are not sensitive to prices, some have outstanding balances and need funds for turnover.

The target users are mainly those between 20 and 39 years old, mainly engaged in office staff, workers, self-employed and other occupations, with an education level of college or below and an income between 2,000 and 6,000 yuan.

The loans are mainly used for capital turnover, emergency expenses and shopping. They mainly come from third- and fourth-tier cities, but live in first-tier cities such as Beijing, Shenzhen, Guangzhou, and Shanghai.

4. Profitability

Cash loans are characterized by high profits and high risks. In terms of the lending business model, the high profits are due to the small amount, short term and high interest rate characteristics of the products.

The product cycle is usually within 7 to 30 days, the loan amount ranges from 500 to 5,000 yuan, and the return is about 35%. That is to say, if you lend out 1 million and the user repays all the money within 7 days, your gross profit will be 350,000.

In actual operations, bad debts are inevitable, but as long as the bad debt rate is controlled within a certain range, the overall profit will still be considerable.

Of course, in the process from lending to collecting payment, customer acquisition, data services, payment services, and overdue collection all require certain costs. But if you control every link well, you can save a lot of costs.

High risk means that high interest rates are already illegal under the premise of high fees. They are just making these costs legal in different forms, such as passing them on to insurance and equity products.

However, regulatory authorities are increasingly tightening control over this area, so the risks in this area are also increasing. If the matter is exposed in media reports, it will be quite serious. There are many related reports on the Internet, so I will not discuss them in detail here.

2. Product Process and Operation

1. Process Description

1) Credit application

Users apply for loans through the APP. Before applying for a loan, you need to undergo an approval review.

When applying for credit, you need to confirm your ID card information (real-name authentication), fill in your mobile phone contacts, authorize your mobile phone operator information, verify your liveness authentication, Taobao, JD information, and other personal information.

After the bank card contract is successfully signed, submit the credit application (you can also sign the bank card contract before applying for a loan after the credit is successfully signed).

2) Credit review :

After the application is submitted, the backend system will automatically generate risk control results through internal risk control and third-party risk control.

At this point, the system automatically approves the user's credit application based on risk control rules (manual approval is also possible).

Rejected users will not be able to apply for loans and will usually be directed to other loan platforms (there are also platforms that will open applications again after 15 to 30 days).

3) Loan application :

Users whose credit is approved will receive a text message notification and can initiate a loan application on the APP. (There are also platforms that will release the loan after the credit is granted)

4) Loans :

The back-end administrator will conduct loan review, and users who pass the review will have the loan credited to their user cards.

Users whose loans are cancelled will not be able to apply for loans again; users whose loans are returned and who need to reapply can borrow again after rebinding their card information.

After the loan is successfully issued, a user repayment plan will be generated (there are also platforms that will issue loans after the credit is approved)

5) Repayment :

Users can repay the loan on the APP. Customers who fail to repay on time will be charged a certain late fee.

When the payment is due or overdue, the system will automatically deduct the amount from the bank card bound to the user.

6) Collection :

For customers who fail to return the items on time, the system will first make internal reminders. For users whose overdue days reach a certain limit, the system will outsource collection.

2. Operation and promotion

The ways to operate and promote the cash loan platform include natural traffic, self-media operation, purchased traffic and marketing fission.

As far as the lending business model is concerned, the most effective and feasible method is to purchase traffic from marketing companies. The marketing company is mainly a loan super platform. The loan super platform provides traffic, and the cash loan platform pays the loan super company according to the agreed payment method.

There are usually two payment methods: CPS and CPA:

• CPS is charged based on the number of successful loans. Some offer fixed fee payments, while others offer payment based on the loan ratio. This price is relatively high.
• CPA is paid based on the number of user registrations, and usually payment is made when user data comes in.

As for the docking methods between the Daichao platform and the cash loan platform, there are several common docking methods: ordinary promotion registration, joint login registration, semi-process docking, and full-process docking.

• Ordinary promotion registration : the company gives the promotion link to the Daichao company, and the Daichao company guides users to click on the link and register users;
• Joint login and registration : Daichao guides users to click on products and pushes user information to the company at the same time. After the push is successful, the user is guided to download the APP.

Compared with joint registration and promotion registration, the loan company can obtain the user's registration information on the cash loan platform. When charging CPA, it has a copy of the registration data, which is convenient for billing. For the cash loan platform, it reduces the steps for users to fill in the registration information, which relatively improves the conversion rate.

Semi-process registration and full-process registration. The process here refers to the entire process of credit approval, borrowing and repayment completed by users on the APP.

• Semi-process : refers to the user's credit application being completed on Daichao, while the user's borrowing and repayment are completed on the APP.
• Full process : refers to the user's credit approval, borrowing and repayment processes are all completed on the APP. Different loan platforms have their own external process interfaces. Development requires a certain amount of work, which will be discussed later.

A vest refers to a new APP that is packaged by repackaging the name, interface style, wording, and control layout of the original APP.

Vests are usually a means for companies to increase their profits. You can imagine that if the Daichao platform is a basin of water, then an APP is a sponge that can absorb the water in the basin. The vest is a copy of the sponge and absorbs water from the basin in the same way.

When a product operation is relatively stable, the cash loan platform will usually copy the APP and connect it with the loan super platform to expand profits.

Conclusion

1. Cash loan platforms are deeply influenced by the policies of regulatory authorities

Since the July 14th anti-pandemic report at the March 15th Consumer Gala, all previously operating products have been suspended and adjusted to move towards compliance.

For example, find a small loan license company to cooperate with, and then transfer the debt; or convert high handling fees into insurance, etc.

Before October 1, due to negative reports on cash loans, tightening policies by regulatory authorities, and the suspension of data services by third-party data service providers. Once again, the original business operations were suspended, readjusted, and prepared for new products.

As cash loan platforms have a limited operating cycle and domestic market regulation is becoming increasingly stringent, cash loan platforms will turn to the Southeast Asian market. In addition, the platform will also operate other related businesses to maintain corporate income. For example, selling products or products with adjusted functions to other companies (becoming a third-party company).

2. Cash loan platforms are highly dependent on third-party companies

Cash loans are highly dependent on third-party companies. When there are changes to the products of a third-party company, the cash loan platform needs to respond in a timely manner.

The changes here include service changes, service suspension, rule adjustments, etc. of third-party companies. Therefore, when designing products, we should follow the principles of simplicity and flexibility.

Simple means that the connection should be made in the simplest way; flexible means that backup third-party service products should be prepared and can be switched at any time.

For example, when designing, the conversion of important payment channels must be taken into consideration. When a third-party payment company suspends its payment services due to policy impacts, the payment can be transferred to another payment company without affecting the normal operation of the business.

3. After the product is stable, the main task will be to connect with traffic channels

Different loan super platforms have different external interface methods, and for profit and security considerations, companies need to try to connect to larger and more stable traffic platforms.

In short, to run a good cash loan platform, in addition to keeping abreast of and paying attention to regulatory changes. When operating a product, it is necessary to choose good channels and improve the risk control mechanism. Make multiple preparations on the payment platform to prevent customers from being unable to borrow and repay loans after the payment platform stops operating. Control collection operations and reduce the occurrence of bad debts.

Author: refurbish

Source: refurbish