China

Lufax to exit Peer-to-Peer lending business

Lufax, which is one of the largest online wealth management platforms in China, reveals its intent to exit its once-core peer-to-peer lending (P2P) business.

The company is backed by Ping An Insurance, the first joint-stock insurance company in China, and the decision to move out of the P2P field has occurred due to the regulatory hurdles. This is particularly pertinent considering China’s recent attempts to crack down on P2P businesses in an attempt to mitigate broader financial risks.

After being in contact with financial regulators, Lufax was allegedly informed that it would difficult for the firm to register as a P2P firm, according to a report by Ejinsight.

Following Lufax’s exit from P2P, the decision has been made for the firm to move into consumer finance, for which it is in the process of applying for a license.

By removing itself from the P2P business, the company had increased the likelihood of potentially achieving a stock market listing, something that Lufax unsuccessfully pursued in the past, as it postponed a Hong Kong stock market float due to some confusion over China’s consumer lending regulation.

The regulations implemented in China in 2017 requires all Lenders, borrowers and guarantors to be registered. Beyond this, P2P companies need provide reports on online deposits, record the flow of funds between accounts, and establish an accounting system with standardized fund deposit clearing.