Martillo de reflejos

In order to develop a set of useful recommendations, we first identified Qiantu’s current credit risk management strategies and determined how the company accomplishes each of the four stages that we mentioned in previous chapters: application process, approval algorithm, pricing model, and post-loan management. Based on interviews and cross-checking with relevant Qiantu staff, we created a diagram of Qiantu’s lending process for its Flash Fund app (see Appendix G), on which we elaborate further in the following sections. Overall, based on what we know, we believe that Qiantu has a credit risk management system that includes many of the best practices we identified in our research of other P2P companies. However, because many of the strategies and models used by Qiantu are proprietary, we were not able to gather very in-depth information on the inner workings of its lending process. Therefore, our recommendations will

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be based on strategies that we believe, but cannot confirm, that Qiantu does not currently implement.

Qiantu’s main product is the Flash Fund loan, which consists of a payday loan, usually either ¥500 or ¥1,000 RMB in size with a repayment period of 7 or 14 days. As the name suggests, the Flash Fund app is designed to be a source of quick credit, where applicants can get an approval decision in several minutes, and borrowers can receive funds in several hours. As a result, to create our final recommendations, we mainly considered strategies that would aid Qiantu without constituting a large increase in time spent verifying the applicants’ information and approving or rejecting them. Additionally, compared to the loan sizes offered by the P2P companies we researched, the size and repayment period of a Flash Fund loan is very small; potential suggestions that we felt would not be appropriate or necessary because of this fact were not considered in the final recommendations.

4.1.1 Application Process

As part of its loan application process, Qiantu collects personal and financial information on its applicants, including name, contact information, monthly income, mobile telephone provider, government-issued ID number, and employment information. Qiantu uses the personal information provided by the applicant to access more information about him or her from outside databases. The company retrieves information about the applicant’s e-commerce activity from AliPay, his or her credit history from Sesame Credit, and personal cell phone activity from the applicant’s mobile provider, to name a few criteria. After these data have been amassed, Qiantu

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information has been collected and processed, the application is moved to the approval algorithm.

Figure 3._​ Flash Fund Application Process 4.1.2 Approval Algorithm

The first step in Qiantu’s approval algorithm (see Figure 4) is determining whether the applicant is a new or returning customer, which will dictate how the approval decision is made throughout the rest of the algorithm.

New customers first must pass a list of minimum requirements (see Appendix H), which includes criteria such as being at least 18 years old and having had a usage plan with a mobile carrier for at least four months. If the applicant passes all of the static minimum requirements, he or she moves on to the dynamic section of the process, the approval model. Even if an applicant was rejected based on the minimum requirements, his or her application will still go through the approval model for the purpose of data collection and analysis. This is because Qiantu works to update the models the company uses in its overall approval algorithm regularly to better predict which applicants will make reliable borrowers. Examining how rejected customers’ data are processed by the model is valuable feedback for the company.

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Qiantu has different approval models that consist of different sets of rules. The model that is used to approve or reject the applicant is determined depending on the origin of the application. Applications directly from the Flash Fund app, for instance, will be reviewed by a different model than applications from third-party sources. Each model consists of a set of rules that assign points based on the applicant’s information. The points the applicant receives from each rule are added together to form the final score. If the applicant’s final score is above a certain threshold, and he or she met the initial minimum requirements, the applicant will then be approved for the loan.

Figure 4. _​Flash Fund Approval Algorithm

For returning customers, the approval process differs slightly. Since returning customers have passed the new customer approval algorithm once before, the approval process is slightly

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investigates the applicant’s past payment history. If the applicant has no record of overdue payments, the application will automatically be approved. Otherwise, there is a single model for returning applicants that functions in the same way as the models described for new customers.

In both cases, if the applicant passes both the minimum criteria and the model, he or she has been approved. However, the applicant is required to undergo and pass a final facial recognition process to receive the loan. Applicants must use Flash Fund’s camera feature to send up to three pictures of themselves moving their head in different ways and making multiple expressions. The results of this process are then compared to the photo connected to the national ID number provided by the applicant during the application process. As an additional anti-fraud measure, Qiantu asks applicants to submit photos of themselves of their daily lives.

On the other hand, failing either the minimum requirements or the approval model renders the applicant ineligible to borrow money through Qiantu. However, if a new applicant is rejected, he or she is able to apply again after 15 days, and returning users may reapply after five days. Additionally, Qiantu will refer rejected applicants to other P2P lending companies; if a rejected applicant who is recommended to another company is approved for a loan, Qiantu will receive a fee from the other enterprise for introducing a customer to its services.

Like many P2P companies, Qiantu takes advantage of data mining capabilities to continually refine its models to better predict which applicants will become reliable borrowers. Qiantu relies on historical data collected from applicants to identify patterns and adjust the points awarded for each rule of each model. For this reason, as mentioned earlier, Qiantu still puts an application that was rejected due to not meeting minimum requirements through the model section of the approval algorithm.

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4.1.3 Pricing Model

After an applicant is approved for a loan, the interest he or she must pay is decided by Qiantu based on its operating costs and the return expectations of the fund group that is advancing the customer capital (see Figure 5). Since the repayment period for Flash Fund is only 7 or 14 days, the interest the customer must pay on the principal he or she receives is decided as a lump sum. For example, if an applicant is approved for a loan of ¥1,000 RMB, he or she would sign a contract with Qiantu Financial Group, its partnering fund group, and the lender, indicating that he or she will pay ¥1,120 RMB on the loan due date (see Appendix C). The additional ¥120 RMB includes Qiantu’s origination charge and the returns owed to the lenders. Since Qiantu does not interface with lenders except to sign the loan agreement, we focused our recommendations on strategies that involve borrowers.

Figure 5. _​Flash Fund Pricing Model

4.1.4 Post-loan Management

Unlike in many established P2P companies, on the day a payment is due, the funding group receives the amount owed by the borrower in full from Qiantu regardless of whether the

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delinquent. If a borrower pays back his or her loan on time, then no further steps are taken by Qiantu. Otherwise, Qiantu has an involved post-loan management system for recovering missing or delinquent funds (see Figure 6).

Qiantu’s process for recovering overdue payments falls into two stages. Stage 1 consists of the first 30 days after a loan payment is missed. Within this time period, Qiantu will make phone calls to the borrower to remind him or her of the overdue payment. Qiantu will also contact relatives, employers, and any other phone numbers provided by the applicant or collected from other data channels in the application process. If within these first 30 days Qiantu has not received a payment, the company enters Stage 2 and recruits the help of a collection agency. This agency then takes over the job of pursuing the borrower and recovering the funds. If this third-party organization is able to collect the money, Qiantu receives the total amount collected in full, minus a small fee that the company has to pay for the agency’s service. If the missing payment is never recovered, Qiantu is never reimbursed for the money it paid the fund group.

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