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SHANGHAI, July 2, 2014 /PRNewswire/ -- Yu'e Bao came into being on June 13, 2013. The money market funds sold over the Internet have little innovation in essence, but has changed the daily lives of many. Yu'e Bao has since pioneered the wave of Internet financing.
Today, yet another revolution is coming. This time, it is online P2P lending that will again change Chinese wealth management habits. At 10:10 am on June 27th, Sina Weicaifu and Dianrong.com, a leading P2P company in China, jointly introduced the RMB3 million 4-month "PP Cat -- Dianrong Shou Yi Wang II" with an annualized yield of up to 10%, which, like the Phase I product, was sold out within two minutes following launch.
Thank Yu'e Bao, as it achieved a difficult task over the past year: it allowed many investors to know another alternative to banks and the stock market for managing their small assets. It enabled Chinese investors to know what liquidity is, as well as what annualized rate of return is. However, today, one year later, these investors who already have basic knowledge are no longer satisfied with the returns delivered by Yu'e Bao, and they will certainly seek substitutes that are more revolutionary, for example, the P2P investment wave being led by Dianrong.com.
We could say that P2P will replace Yu'e Bao and become a true innovator in Internet financing.
P2P is a true financial innovation over Internet
For a long period of time in China, the average person has known nothing about wealth management, with little knowledge of financial products other than bank deposits. In fact, many financial products including MMF have existed for a long time. The high liquidity and relatively solid return of MMF is nothing new, and its advantages versus demand and time deposits have not been a secret. However, prior to the emergence of Yu'e Bao, many people knew nothing about it. So, Yu'e Bao has been deemed as an amazing "financial innovation" in China for a long time.
Financial innovation has many definitions, but essentially, only when a new financial instrument is created, can it be called an "innovation." At most, Yu'e Bao has made a breakthrough just in sales channel and found a smart marketing channel to attract funds from investors.
P2P is peer-to-peer lending and a key innovation in Internet financing. It can quickly gather idle and small funds from society to enhance the utilization efficiency of funds. It eliminates the need for intermediaries such as banks and other financial institutions, i.e., financial disintermediation, which enables a seamless match of fund supply and demand directly between creditors and borrowers as well as individuals and businesses, saving numerous transaction costs and surrendering benefits directly to creditors and borrowers. So it will certainly trigger a revolution in the financial industry.
In some sense, P2P companies like Dianrong.com will make the world more and more equal. Previously, only large investors could diversify their investments and get high returns. At Dianrong.com, you can diversify your investment and also get a high return despite limited money on hand.
Now, Yu'e Bao has an annualized interest rate of about 4%-5%, while the "PP Cat -- Dianrong Shou Yi Wang I," which was sold out in two minutes after Sina Weicaifu went live, delivers a return of up to 10%.
Dianrong.com helps around 1,000 small and medium-size businesses
On April 8, 2014, China's central bank Governor Zhou Xiaochuan proposed his expectation for Internet financing -- not only benefiting people in general but also supporting the development of the real economy.
Yu'e Bao, which is an MMF in essence, is not materially useful to the real economy. In contrast, by establishing an individual-to-individual direct financing channel, P2P optimizes resource allocation, and helps small and micro businesses who have no access to bank financing or are confronted with the problem of a long period to get financing, which is a true support for the real economy.
Most of those who borrow money at Dianrong.com are small businesses or individuals who are in urgent need of funds. Despite their good credit profile, they are often refused by other financial institutions such as banks as a result of various restrictions. Dianrong's P2P technology enables alignment between individual fund demand and investment opportunities, benefiting both creditors and borrowers while helping borrowers.
In 2013, Dianrong.com raised funds successfully for around one thousand SMB loans, which also means it truly empowered the development of around one thousand businesses.
China's leading media organizations embrace the country's strongest P2P company
When investing in P2P, it is important to select a platform. What are the criteria? The simplest one is selecting a platform that has received VC investment. Dianrong.com received an investment of around US$10 million from Northern Light Venture Capital in December 2013.
As P2P lending is developing fast and regulations are becoming clear, even banks that have regarded P2P as a great threat since its inception are trying to embrace it under the efforts of P2P companies led by Dianrong.com. On May 22, 2014, the China Banking Regulatory Commission held a closed meeting of several large P2P institutions including Dianrong.com to gain an understanding of industry updates and seek regulatory opinions, indicating that the supervision of the P2P industry is being put on the agenda.
In May 2014, Dianrong.com was recognized by Lend Academy, a US-based P2P research agency, as "China's most important P2P lender." The partnership being actively proposed by a well-known brand in China enables people to put more trust in Dianrong.com.
The selection of Dianrong.com by Sina Weicaifu as its first P2P lending service partner is an important decision being undertaken by Sina after having reviewed multiple Chinese P2P lenders. Sina selected Dianrong.com as the P2P firm boasts the DNA of Lending Club, the world's largest P2P platform, and purely compliant P2P models. It is not only a recognition of P2P from the most powerful media brand in China, but with its public trust and influence, Weicaifu will also help investors select trusted P2P platforms and boost their confidence, allowing more Internet users to get a higher rate of return on their investment at Dianrong.com.
Dianrong.com is an online lending platform based in Shanghai, China where members can borrow and lend money among themselves at better interest rates. Borrowers can get loans significantly below market rates, and lenders can earn returns well above those of bank deposits, wealth management products, trust products and other traditional fixed-income investments.
Named the "Lending Club of China," Dianrong.com was founded in 2012 by the co-founder and former Head of Technology of Lending Club, Soul Htite, who joined efforts with Kevin Guo, a PE fund partner and lawyer from Shanghai. Dianrong.com 's proprietary and state of the art technology gives Dianrong.com a huge advantage over traditional banks by reducing the cost of customer acquisition, underwriting, fund managements, bad debt collections, regulatory compliance, and reporting. Better rates and better returns are now a reality in China.
Using the latest proven techniques in risk management and advanced technology similar to the one used by Lending Club (the world's largest online lending platform), Dianrong.com has built a matching professional, transparent and easily operable online investment and financial platform, providing investors with an option to invest in individual consumers or small and medium-sized enterprises in need of money. Leveraging the Internet platform, Dianrong.com has achieved lower auditing and operating costs than other financial institutions, benefiting both investors and borrowers.
In addition, Dianrong.com has an experienced team and strong risk control abilities. The company's risk control model, which is based on seven years of experience in developing nearly one hundred risk models for commercial banks while taking full advantage of Internet sources and several third-party sources, has a comprehensive process to detect and prevent fraud risk through more than 50 information detection rules coupled with a seasoned team of manual investigators, in order to reduce investment and financing risks.
Since public launch in March 2013, Dianrong.com platform has yield an overall portfolio return of 16.7% (after fees and NLPs). The company offers free portfolios tailored to each investor's appetite for risk, with an optional investment lifecycle of 6, 12, 18 or 24 months. Investors in dire need of money can also assign their creditor's rights for discounted cash from their investment, and they can top up and withdraw cash at any time, free of any handling charges.
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