Technology Sep 16

Alipay loans hit 300bn yuan as youth turn to credit

Lending provides a new revenue stream as the one-time financial darling faces an existential threat from the central bank’s planned cryptocurrency 

Alipay loans hit 300bn yuan as youth turn to credit

(ATF) Alibaba’s Alipay has reportedly lent 300 billion yuan ($43bn) in loans as part of a business diversification programme driven by the prospect of stiff competition for its core digital payments business from an official cryptocurrency. 

Worryingly for economic planners, however, the largest recipients of the loans have been younger users born in the 1990s or later, according to a report in Asia-wide youth-culture magazine Neocha. They are topping up low wages with cheap debt, threatening the government’s hopes to grow the Chinese through domestic consumption rather than exports.

Concern is growing that private debt in China is reaching unsustainable levels. As reported in ATF report last week, more than half of the nation’s 1.4 billion inhabitants have little or no bank deposits, forcing them to seek credit, especially mortgages.

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Alipay’s future is threatened by the People’s Bank of China’s plan to introduce a digital yuan. In response, it has massively increased loans to users in a similar model to Paypal Credit in a bid to open new lines of revenue.

Alipay is a unit of Alibaba Group, which consists of numerous firms such as Taobao.com, Aliexpress and other online auction sites.

The ploy may yet struggle to turn a profit amid growing financial disillusionment among China’s younger generations, the report said. 

“Young people are finding an over reliance on credit is not a good choice,” Neocha reported. 

Alipay’s latest woes come at a troubled time for the one-time darling of China’s financial industry. While euphoria surrounds the recent $30bn listing of its sister affiliate Ant Financial, Alipay is fighting to shrug off association with China’s notorious social credit system and has fallen pray to fraudsters.  

While social credit data is used to gauge consumers’ suitability to borrow money, critics says it’s also used as a social engineering tool, keeping a record of citizen’s activities and potentially being used to judge their political trustworthiness. The result has been a decline in the number of younger users of Alipay’s digital payment system. 

More recently, fraudsters have been publishing a fake Alipay loan app and duping tens of thousands of yuan from users. 

There is no specific loan app for Alipay, it is part of the Alipay system. But unwitting users who have downloaded the bogus app have reported losing as much as 90,000 yuan in a case in Wenzhou.

As online ‘instant’ loans are increasingly popular in China fraud cases are similarly increasing and becoming more sophisticated.

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