Boosting consumer spending is not just a goal; it's a crucial strategy for strengthening domestic demand and enhancing the inward circulation of the economyDuring the recent Spring Festival, licensed consumer finance companies rolled out a multitude of promotional activities aimed at stimulating spendingMany firms leveraged interest-free installment plans to provide tangible financial relief, thereby spurring consumption upgrades and unlocking the potential of the holiday economy.

The digital transformation plays a pivotal role in invigorating consumer spendingSince the beginning of the year, licensed consumer finance companies have responded to the government’s call to promote consumption and expand demand by integrating online and offline servicesThe result has been a colorful spectrum of promotional campaigns designed to entice consumers.

Digital tools have become essential for these financial institutions in refining their consumer outreachFor instance, Zhongyuan Consumer Finance has utilized digital methods to accurately connect with users and streamline participation in eventsConsumers can simply log into the Zhongyuan Consumer Finance app to take part in activitiesTo tailor their offerings to the distinctive characteristics of Spring Festival spending, the company launched the "Snake Year Brings Luck, Collect Characters for Interest-Free Rewards," which enabled participants to collect characters in exchange for half-year interest-free vouchers among other benefitsThe financial outreach proved successful, with data showing that Zhongyuan Consumer Finance disbursed over 600 million yuan during the Spring Festival and served over 120,000 clients, with an average daily active user count exceeding 200,000 on their appAccording to Zhou Yu, Executive Vice General Manager at Zhongyuan Consumer Finance, the Spring Festival represents a peak period for family spending needsBy offering high credit limits and low-barrier, interest-free promotions, they aim to ease financial burdens and align services more closely with consumer needs.

Additionally, Haier Consumer Finance significantly enhanced its digital financial services, achieving an average credit approval time of just five seconds during the Spring Festival, resulting in nearly 300,000 loan recipients and over 320,000 approved loans.

As outlined by Ouyang Rihui, Vice President of the China Internet Economy Research Institute at Central University of Finance and Economics, digitalization transcends traditional constraints and allows for swift connections with financial consumers

Advertisements

It not only improves the quality and efficiency of services but also saves vast amounts of human and time resourcesThis is crucial for consumer finance institutions aiming to tap into consumer potential and drive consumption growth.

Consumer finance institutions have strategically focused on key spending sectors, embedding their products and services directly into consumption scenariosXingye Consumer Finance intensified its credit support and expanded its operational areas by offering tailored credit solutions based on various consumer preferences and income cyclesUsing big data and process optimization, they consistently enhance their business efficiency and customer satisfaction, catering specifically to the consumption needs during the Spring Festival.

Throughout the holiday period, consumer finance companies formed deep partnerships with e-commerce platforms, offline retailers, and travel service providers to seamlessly integrate digital financial services into everyday spending situationsConsumers enjoyed the convenience provided by consumer finance at every buying touchpointAmid the digital wave, these companies are leveraging technological innovations to extend the boundaries of consumer financing, significantly lowering entry barriers to retail finance and enriching the shopping experiences of consumers, thus invigorating the holiday economy.

Examining the financing landscape of consumer finance, it is clear that, despite impressive growth in recent years, the sector is encountering new challenges such as heightened financing difficulties and rising non-performing loan ratesTo lower costs and promote consumption more effectively, these institutions need to break through financing barriers and mitigate credit risk to satisfy consumer credit demands.

Li Peijia, head of the financial team at the Bank of China Research Institute, notes that consumer finance companies are facing escalated financing pressures as of 2024, primarily due to rising non-performing assets leading to greater capital consumption

Advertisements

Several companies have resorted to selling non-performing personal loan asset bundles, with outstanding principal exceeding 20 billion yuanThe deterioration in asset quality could affect their credit ratings, increasing challenges in raising funds and boosting financing costsFurthermore, capital supplementation pressures have escalated as some firms, having expanded rapidly earlier, now struggle to meet regulatory capital adequacy requirements, facing significant capital injection pressures.

In order to secure medium- to long-term low-cost funding sources and meet diverse consumer credit needs, consumer finance institutions are rapidly exploring multiple financing channels and utilizing innovative tools like financial bonds and asset-backed securities (ABS) to strongly support the expansion of consumer credit and foster a prosperous consumption market.

In 2024, licensed consumer finance companies have issued a total of 33 financial bonds, amounting to 52.4 billion yuan, with the highest coupon rate at 3.00% and the lowest at 1.99%, averaging 2.33%. According to senior research analyst Su Xiaorui from Suxi Research, the downward trend in interest rates is linked both to the broader economic environment and reflects growing market acknowledgment of licensed consumer finance entitiesIn the latter half of last year, six new licensed consumer finance brands entered the bond market, and approximately 2025 is expected to witness mid-sized institutions continuing to be pivotal in securing new licenses and persistent issuance, becoming major contributors to the bond issuance expansion.

Licensed consumer finance companies have long been diversifying their financing routes to reinforce their capabilitiesBesides financial bonds, ABS is also a commonly utilized method for these firms to supplement their capital, which plays a beneficial role in cost reductionPreliminary statistics indicate that since 2024, multiple consumer finance companies, including Ningyin Consumer Finance, have collectively issued 14 ABS products while raising over 20 billion yuan

Advertisements

Overall, some consumer finance institutions report coupon rates for ABS products as low as 2.04%, with a general downward trend observed in the rates of ABS issuance among the majority of these companies.

Ouyang Rihui indicated that the inability of licensed consumer finance institutions to attract deposits, coupled with their singular financing structures, results in higher financing costs and considerable asset-side risk fluctuationsHence, diversified, low-cost financing avenues can effectively elevate these firms' core competitiveness.

Currently, for consumer finance companies, enhancing cost-effectiveness and broadening domestic demand is not only a reflection of regulatory compliance but also an urgent business imperativeThe non-banking regulatory authority has emphasized the importance of supporting these companies to pursue sustainable developmental roads that align with their unique resource endowments, thus effectively reducing operational costs and maintaining lowered lending charges, contributing significantly to the establishment of a robust domestic market.

Consumer finance serves as a vital driver for stimulating spending and expanding domestic demand, uniquely positioned compared to commercial bank consumer lending, acting as a complementary forceXu Zewai points out that the active financing environment and diverse channels available to consumer finance companies provide greater operational flexibility, allowing them to ease credit conditions and lower entry barriers, which subsequently enhances consumer spending power and contributes sustained growth in the holiday economy.

Enhancing inclusive finance is a critical trajectory for expansion in the consumer finance sector, highlighting the need for high-quality credit supply and broadening the scope of financial servicesAt its core, inclusive finance aims to extend financial services to every corner of society, particularly focusing on underserved groups traditionally neglected by conventional financial institutions

Within this framework, consumer finance companies play an indispensable role.

As entities specializing in consumer credit, these companies significantly influence the efforts to boost domestic demand and improve consumer capacityOuyang Rihui asserts that the essence of inclusive finance lies in serving a broad swath of the public to achieve social equity and economic advancementPropagating inclusive finance down to various tiers is not only about integrating into urban and rural community governance but also exploring collaborative pathways between finance, regional development, and community management, serving as a powerful catalyst for rural revitalization and tangible economic growth.

Rural revitalization marks a focal point for the downward push of inclusive financeDuring the Spring Festival, the influx of migrant workers returning home represents an undeniable opportunity for increased consumer finance activityXu Zewai points out that certain consumer finance companies have tailored financial offerings for rural areas, targeting appliance purchases, and stimulating spending through lowered interest rates and installment payment options.

Moreover, catering to new city residents has emerged as a primary approach for enhancing inclusive financeData from Haier Consumer Finance indicates that during the Spring Festival, the consumer credit segment effectively supported new urban residents, with an addition of 14,000 new users and aggregate loans amounting to 450 million yuanLi Peijia notes that as urbanization progresses, many rural individuals transition to cities, becoming new citizensDespite their substantial consumption potential, this group frequently finds it challenging to meet traditional banking requirements for loans due to a lack of stable credit histories and suitable collateralConsequently, their consumption credit needs often go unmetTo address this gap, consumer finance institutions must champion inclusive strategies and employ diverse methods to alleviate financial pressures for consumers.

Advancing inclusive finance is an enduring initiative

Advertisements

Advertisements