Billionaire Zhou Takes on Jack Ma, Tencent in China’s Online Loan Market

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Billionaire Zhou Hongyi is making a grab for a share of China’s lucrative online lending market, which is dominated by Jack Ma’s Ant Financial and Tencent’s financial unit.

Zhou’s 360 Finance Inc. — an online lending platform — plans to use a group company’s purchase this week of a 30% stake in a Tianjin bank to access cheaper funding and lure small companies and individuals away from rivals with lower-cost loans. Non-state-owned Kincheng Bank of Tianjin Co. is now the third Chinese lender to count an internet company as its largest shareholder after Ant-backed MYbank and Tencent-backed WeBank.

360 Finance is modeling itself after the two internet behemoths, which have cornered China’s digital lending market by channeling 5 trillion yuan ($705 billion) of bank credit to hundreds of millions of users online. Their head-start ensures an uphill struggle for Zhou’s Nasdaq-listed platform. But the tycoon will be hoping to replicate his success in coming from behind and building a profitable, if not market-leading, business in cybersecurity software with 360 Group.

“360 will use its own traffic, users, big data and supply-chain to help the bank grow its business,” Liu Wei, a senior vice president at 360 Group, said in an interview. The firm has accumulated good quality users, but hasn’t converted them into loan customers because of interest-rate fluctuations and other costs, he said.

360 Security Technology Inc., an affiliate company, rose 1.7% to 19.4 yuan in Shanghai Thursday, the highest in seven weeks.

The platform has worked with more than 100 financial institutions and helped banks issue 20 billion yuan in loans last year. It issued credit to more than 26 million people as of the end of March, 63% more than a year earlier.

While 360 Finance will continue working with other lenders, the Kincheng partnership will allow it to offer interest rates below 18%, or 6 percentage points less than what lenders typically offer when working with the platform, Liu said. China’s 18 largest banks issue small business loans at 4.94% on average, but online lenders frequently deal with customers who lack the collateral to access such loans.

Kincheng was among the first batch of non-state-owned banks approved in China, along with MYbank and WeBank, but its assets and profits have been dwarfed by the two online lenders. WeBank, for example, held 300 billion yuan of assets and made 40 billion yuan in profit last year. Kincheng’s profit was less than 200 million yuan.

Zhou built his fortune on 360 Group, more commonly known as Qihoo for its ant-virus software, before listing its finance offshoot in 2018. He holds 76% of voting power in 360 Finance, according to filings. Zhou is worth $3.7 billion, data compiled by Bloomberg show.

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