Talking nonsense in the name of responding to doubts, what lies did Qudian CEO Luo Min blatantly tell?

Late in the evening, I was amused by an interview in which CEO Luo Min explained outside doubts.

In this article titled "Qudian Luo Min Responds to Everything", Luo Min responded to previous media and public doubts about Qudian lending high-interest loans to students and being subject to Alipay and its risk control system. When talking about Qudian's debt collection issues, Luo Min said something that made everyone very excited:

"Any overdue debt is considered a bad debt here. We will not urge them to pay back their bad debts. We won't even call them. If you don't pay back the money, forget it. We will just give it to you as a welfare. That's it."

In order to show that Qudian's annualized interest rate did not exceed the country's red line of 36% for private lending, Luo Min himself even left a message under the article, saying that if anyone found that Qudian's nominal and actual interest rates exceeded 36%, Luo Min would directly provide 1 million in sponsorship funds.

A cash loan company. If users borrow money on its platform and fail to repay it on time, the money will be considered as free and the company will not ask for repayment. If anyone finds that the platform's loan interest rate exceeds 36%, the CEO will be rewarded handsomely. If this is true, what kind of Lei Feng spirit do Qudian and Luo Min have?

Any sane person would not take these words seriously, right? But this counterintuitive statement was made by the CEO of a company listed on the New York Stock Exchange with a market value of tens of billions of dollars, especially when the company was under external doubts - did Luo Min really want to give the public an explanation, or did he think that no matter what he said, everyone would accept it, so he just said it in a bold way?

I don't know, and it doesn't matter. Anyway, you can't see any questions from the financial or professional perspective in this article. There is no doubt or inquiry at all. It just gives Luo Min another stage to flatter himself and Qudian.

Isn't this treating everyone as fools?

Although the article is titled "Qudian Luo Min Responds to Everything", Luo Min basically did not respond to any of the questions. When asked "whether we lend money to students", Luo Min only said "once we find out someone is a student, we refuse to lend money"; when asked "whether we instigate people to borrow money from multiple sources when they can't afford it", he turned into Lei Feng and "didn't ask for payment, just give it as a welfare"; when talking about the topic of "high profit margin", he compared Qudian with JD.com, regardless of whether they are the same type of companies financially.

There is something even more serious than being vague: not only are there many expressions in Luo Min's words that are inconsistent with the facts, but some of the content even contradicts the description in Qudian's prospectus.

In November last year and October this year, I published two investigative reports shortly after Qudian announced its withdrawal from the campus market and after submitting its prospectus. Based on a detailed investigation of the company's actual business, I concluded that Qudian is a company that is completely dependent on Alipay, is only responsible for finding money for lending, has poor operational capabilities, and even talks about business ethics. (For details of the investigation and conclusions, see "The Rise and Fall of Campus Loans in Three Years: From Collective Carnival to Eternal Disaster" and "Unveiling the Halloween Mask of Qudian's IPO")

Luo Min’s response made me more confident in my own judgment: How many lies are there behind a CEO’s company who dares to lie to the public, and whose lies are so easily exposed?

Let's look at how Luo Min lied with open eyes:

1. If you want Qudian to stop collecting debts, the borrower must either die or not repay the loan for half a year.

"No. All overdue debts are considered bad debts here. We will never urge them to pay back their bad debts. We won't even call them. If you don't pay back the money, forget it. We will just give it to you as a benefit. That's it."

This sentence excited everyone the most, but it was also the most irrelevant.

Regarding the collection situation, page 178 of Qudian's prospectus has a very detailed disclosure: First, Qudian will use text messages and automatic voice calls to collect debts from borrowers; if unsuccessful, Qudian's collection staff will call the borrower manually, and will collect the debt in person when necessary. Among them, if the user is overdue for more than 20 days, Qudian will proactively disclose it to Sesame Credit.

Let me explain this briefly. Before the so-called "AI algorithm risk control system" was launched, all Qudian did in terms of risk control was to pay Sesame Credit to do risk control. Moreover, while Qudian enjoyed almost free traffic from Alipay, all borrowing and repayment behaviors between corporate accounts and users were placed on Alipay, which was equivalent to completely opening up operating data to Sesame Credit. Therefore, Qudian will actively disclose overdue data to Sesame Credit.

Qudian said that debt collection will only be stopped in three situations: the borrower dies, is found to be fraudulent, is overdue for more than 180 days, or the number of debt collections reaches a certain number.

Among Qudian’s employees, 222 are in Tianjin and 367 in Fuzhou. Their main task is to operate the call center. In addition, there are other employees in various cities responsible for debt collection. Employees in these two cities account for about 60% of all employees.

In addition, as soon as the "Response" article came out, an article used screenshots to expose Luo Min's lies. For details, please see "Does Qudian really not collect debts? This is what the "Quit Gambling" brother said."

To the SEC and to the public, who exactly is Luo Min lying to?

2. Exiting the campus market = refusing to allow students to consume in installments?

"Before 2015, we mainly lent money to students. Later, the government stopped it, so we withdrew. Now, if we find out that someone is a student, we refuse to lend money. For example, if a person fills in an address that is a school dormitory, we will refuse. If a person fills in an address related to a school, such as a residential building in an alley outside the east gate of Renmin University, we will also refuse."

What this sentence means is that now, as long as we find that a student is borrowing money, we will not lend it.

This method of screening student users is only valid when purchasing goods in installments from the Qudian platform, because when borrowing cash, there is no need for users to "fill in their address" and they only need to verify their Sesame Credit score.

Cash loans account for more than 83% of all Qudian's businesses. Using less than 20% of the business as a method to identify students is like confusing students.

In addition, in the article "Unveiling the Halloween Mask of Qudian's IPO", several independent sources confirmed to me that Qudian's so-called withdrawal from the campus market actually means stopping its offline promotion.

There is a problem involved here, which is the student stock.

From the historical data of Qudian:

Among the five important indicators, namely the average monthly active users, the number of active borrowers, the number of new borrowers, the number of transactions and the transaction amount, none of them occurred at the critical time point of the first half of 2016 (which is also the time point when Qudian claimed to completely withdraw from the campus), indicating that Qudian had withdrawn from the campus market.

The withdrawal from the campus market has not affected the operating data at all. This at least shows that there are still students among Qudian’s users.

In April last year, the China Banking Regulatory Commission issued a clear ban on non-licensed financial institutions from lending to students. In March this year, Qudian received a rectification notice from the Beijing Internet Finance Rectification Office, which is part of the China Banking Regulatory Commission's management measures for Internet finance and cash loans. The requirement of this rectification is to "reduce the stock of illegal businesses to zero."

Moreover, if you can’t even fully identify student users, how can you talk about risk control and compliance? If you can identify them, why don’t you clear the existing stock according to regulations?

3. Luo Min has no idea what his risk control system is like?

"Our bad debt rate is less than 0.5%, the lowest in the industry and lower than that of credit cards. There are many banks and companies that provide consumer loans on Alipay, and they are also connected to Sesame Credit. Most of them have higher bad debt rates than us, which shows that our own risk control is working. We have 48 million users who have placed orders to borrow money. They all have Sesame Credit, but only more than 30% can borrow money from us. The rest are eliminated through risk control."

Luo Min’s logic is that for Sesame Credit, which is also "connected" to Alipay, Qudian’s low bad debt rate shows that its own risk control is working.

Putting aside the fact that each company has a different definition of "bad debt rate" and cannot be directly compared horizontally (for example, Qudian only has one data point, M1+ Delinquency Rate by Vintage), you should know that although some companies have also connected to Sesame Credit, they do not use Sesame Credit's risk control analysis service.

But Qudian not only connected to the credit score, but also paid a lot of money to run its credit.

The prospectus shows that since Qudian began to turn to online lending and connected to Alipay in November 2015, it paid Ant Financial 6.2 million and 11.3 million in credit analysis fees in 2016 and the first half of 2017, respectively.

As for what Luo Min calls "its own risk control" system, that is, the "artificial intelligence risk control system" that was just launched in the second quarter of 2017, the prospectus describes it as follows:

For the A Score of new users’ risk assessment (the main part of so-called risk control), three items are provided directly by Sesame Credit, and the other two are user information that Qudian cannot obtain - there is every reason to believe that this information comes from Alibaba’s Taobao shopping data and Weibo account.

4. Can the relationship between Alipay and Qudian be the same as that between Tmall and Nike?

"Alipay's share is the same for everyone. The same percentage is given to other companies as ours. This is a competitive market. Just like Tmall gives the same percentage to Nike's own stores and agency stores, each company competes based on its own operational efficiency and user experience."

Alipay's profit sharing ratio is indeed fair to all, but what Luo Min avoided talking about is that Alipay's resources are not open to all third parties, and competition does not exist at all.

If you open the user page of the Alipay app and go to "More", you will find that most of the services are provided by Alipay itself or Alibaba Group-related services, and only a few third-party services have their own entrances.

Among these few third-party services, only Airbnb is a true third-party service. Others such as Ele.me, Didi Chuxing, ofo Bicycles and Laifenqi are all Alibaba's investment companies, and they are all very important strategic investments.

But this is obviously completely different from Nike and Adidas opening flagship stores on Tmall - there is only shareholding, no competition. Luo Min is playing dumb with this, obviously pretending to be ignorant.

In addition, Alibaba does not treat all financial companies it holds shares in this way. An industry insider revealed to me that although Alibaba is also a shareholder of ZhongAn Insurance, which just went public, it has basically stopped transferring any benefits to ZhongAn.

5. Who has benefited from this?

"Lu Hongyan: How many people would borrow 900 yuan?

Luo Min: What we actually provide is an online credit card. Only 200 million people in China have credit cards, most of whom are in big cities. People in third-, fourth- and fifth-tier cities, and migrant workers, do not have credit cards. Those who use credit cards to shop and eat are not unable to afford the money, but they enjoy installment payments, which is a financial service and a habit. We let those who do not have credit cards enjoy this service. Some banks want to cooperate and issue credit cards to our 18 million borrowers. They recognize these users of ours. Lu Hongyan: How do users spend the money you lend? Luo Min: 10% buy goods, such as mobile phones, computers, shoes, and pots. Nearly 90% eat, shop on Taobao, and buy tickets. Only a few people withdraw cash. In fact, this is their credit card. "

What kind of people are served by Qudian?

Qudian's business model is derived from the "Payday Loan" product in Europe and the United States. In the United States, payday loans are mainly operated offline, providing small cash loans to people who have difficulty even maintaining basic living expenses. It has several typical characteristics:

1. The loan amount is extremely small, between $100 and $1,000. Such a small amount cannot be used as a capital turnover for small businesses or small owners, and can only be used as a personal loan. Think about it, how many people would pay such a high capital cost for a few hundred dollars?

2. Extremely high interest rates. According to media statistics, the annualized interest rate for this type of cash loan is as high as 391% for every $100;

3. The repeat borrowing rate of users is extremely high. According to reports from several US financial and social media, a typical characteristic of Payday Loan users is that they will borrow again after paying off the previous loan. Correspondingly, in the first half of 2017, the average number of borrowings per active borrower in Qudian was 5.8.

Judging from the loan amount, user portrait and user behavior characteristics, it can be seen that Qudian does not differ much from these Payday Loans.

But even in the United States, Payday Loan is a business that is like a rat crossing the street: most media have very negative reviews of this product. In 2016, Google even decided to ban the advertising of Payday Loan products worldwide.

I have never heard of anyone who would rather endure such high costs of using money or who is willing to borrow high-interest loans again and again just to "enjoy the "financial service" of "installment payment."

This enjoyment is too expensive.

In addition, Qudian itself does not have a payment license, and the transactions between its company account and the borrower's account are all conducted through Alipay. How did Alipay users know that their money was flowing to Qudian?

The "Response" article begins by summarizing the two criticisms of Qudian: one is that it is commercially unreliable, and the other is that it is morally dishonorable. But Luo Min is unwilling to keep quiet and make a fortune, and instead exaggerates such an unreliable and dishonorable business to make it reliable and decent, to the point where his weakness is so obvious that it is really eye-opening.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.