Ah, young love. Their public offerings barely past, China’s Alibaba and US peer-to-peer finance pioneer Lending Club have hooked up. Lending Club will offer working capital financing to US businesses that buy from Chinese suppliers on Alibaba.com, an English language business-to-business website. The companies promise that an application takes less than five minutes, and offer up to $300,000 in funding. Monthly lending rates range from 0.5 per cent to 2.4 per cent (6 per cent to 32 per cent annually).
It is a canny pairing. Alibaba contributes the borrowers, providing insights into their creditworthiness from online transaction history, and visibility on the usage of the funds. It should benefit from added sales on Alibaba.com, which is one of its smallest online marketplaces (others include Taobao, a Chinese language consumer-to-consumer site, and Tmall, a business-to-consumer site). Lending Club, meanwhile, gets access to a pool of borrowers. Consistent with Lending Club’s model, the loans will be packaged and passed on to individual and institutional investors in the US.
This is just Alibaba’s latest step into finance. Through affiliate Ant Financial it already operates China’s largest money market fund, with assets of more than $80bn. Last month, Ant Financial became the first of eight companies granted a licence to launch a credit-scoring service, Sesame Credit. It will benefit from access to data on Alibaba’s 300m consumers and 37m small business users — including visibility on merchants’ cash flows. In a market with short credit histories, and outmoded and disconnected data collection processes, the new business could change consumer finance.