Among the six US-listed fintech companies, five saw year-on-year revenue growth, but only two experienced year-on-year net profit growth.

Insufficient credit demand, difficulty in finding high-quality assets... How were the operating conditions of fintech companies in the first half of the year?

Recently, six US-listed fintech companies, including Lufax Holding (NYSE: LU), Qifutech (formerly 360 Finance, NASDAQ: QFIN), LexinFintech (NASDAQ: LX), FinVolution (NYSE: FINV), Xiaowin Technology (NYSE: XYF), and Jiayin Technology (formerly Jiayin Fintech, NASDAQ: JFIN), have successively disclosed their unaudited financial performance for the second quarter of 2024.

Looking at the operating data of each fintech company, the overall trend continued from the first quarter, characterized by increased revenue without increased profits, contraction of loan scale, and an increase in overdue rates.

However, among them, some fintech companies have shown changes in development.

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In terms of performance indicators, some institutions have seen sequential improvement; in terms of asset quality, some institutions have seen improvement in risk indicators; in terms of loan scale, on the basis of continuing a prudent attitude, some institutions plan to accelerate their development pace in the future.

The trend of "increasing revenue without increasing profits" continues, with some sequential improvements in financial reports showing that most fintech companies continued the trend of increasing revenue without increasing profits from the first quarter.

The top three in revenue are still Lufax Holding, Qifutech, and LexinFintech, with revenues of 5.976 billion yuan, 4.16 billion yuan, and 3.641 billion yuan, respectively; in terms of net profit, the top three are Qifutech, FinVolution, and Xiaowin Technology, with 1.376 billion yuan, 551 million yuan, and 415 million yuan, respectively.

Among the six US-listed fintech companies, five saw year-on-year revenue growth, but only Qifutech and Xiaowin Technology saw year-on-year net profit growth.

According to Wu Haisheng, CEO and director of Qifutech, in the second quarter, the loan volume of Qifutech's business without bearing credit risk accounted for nearly 65% of the total loan scale.

The optimization of the loan structure not only helped Qifutech reduce risks in a challenging environment but also helped it achieve better financial performance.

"In the second quarter, thanks to a prudent customer acquisition strategy and diversified customer acquisition channels, our customer acquisition costs were further reduced.

At the same time, in a relatively loose capital environment, we continued to strengthen cooperation with financial institutions, and the overall cost of funds further decreased, setting a new historical low," said Wu Haisheng.

Li Kan, president of Xiaowin Technology, said, "The strategy of actively managing loan volume based on asset quality continued to be effective in the second quarter."

It is worth noting that the three fintech companies that "increased revenue and reduced profits" in the second quarter are the same as in the first quarter, namely FinVolution, Jiayin Technology, and LexinFintech.

Among them, LexinFintech had the largest decline in net profit, with revenue of 3.641 billion yuan in the second quarter, a year-on-year increase of 19.1%; net profit was 230 million yuan, a year-on-year decrease of 36.30%.

However, compared with the first quarter, LexinFintech's net profit performance in the second quarter has improved, with a sequential increase of 12.4%.

"Since the fourth quarter of last year, we have comprehensively upgraded our risk team and risk system, and the underlying risk control capabilities have been significantly enhanced.

The company's ability to resist systemic risk cycles has been continuously strengthened, and profitability has begun to gradually improve," said Xiao Wenjie, CEO of LexinFintech.

FinVolution, which also saw an improvement in sequential data, achieved a net profit of 551 million yuan in the second quarter, a year-on-year decrease of 6.61%.

However, compared with the first quarter, this indicator has risen.

Jiayin Technology achieved revenue of 1.476 billion yuan in the second quarter, a year-on-year increase of 15.5%; net profit was 238 million yuan, a year-on-year decrease of 27%, and a sequential decrease of 12.8%.

Lufax Holding, which has just completed the transition to a 100% guarantee model, continued the trend of "double decline" in revenue and net profit from the first quarter: revenue of 5.976 billion yuan in the second quarter, a year-on-year decrease of 35.5%; net loss of 730 million yuan, a year-on-year decrease of 172.7%.

Zhu Peiqing, CFO of Lufax Holding, said that the accounting treatment of setting aside risk reserves according to the 100% guarantee model will have an impact on short-term profitability.

The overdue rate continues to rise, and the loan scale is reduced.

Why do most fintech companies "increase revenue without increasing profits"?

According to "Caijing," there are multiple practical factors behind this.

On the one hand, facing increasingly fierce market competition, it is not easy for fintech companies to acquire assets.

Under this background, some fintech companies have seen an increase in marketing costs and the like.

On the other hand, the increase in bad debt losses due to asset quality pressure.

"Most fintech companies mainly target the long-tail customer group.

Affected by multiple factors such as the macro economy, consumer credit faces pressures such as an increase in non-performing rates, and provisions and write-off losses have increased accordingly.

When the loss rate is greater than the revenue growth rate, there will be an increase in revenue and a decrease in profits," said Ji Shaofeng, the initiator of the Business Innovation Cooperation Mechanism of China's Small and Micro Credit Institutions.

In the first quarter, the M3+ (more than 90 days) loan overdue rate of the six US-listed fintech companies rose across the board.

By the second quarter, except for Lufax Holding and Jiayin Technology, the M3+ loan overdue rate of the other four companies further increased.

In response, "tightening the front line" has become the strategy for many fintech companies to resist the downward risk of asset quality.

In the second quarter, most fintech companies continued to take measures to reduce the loan scale.

As of the end of the second quarter this year, the top three in loan balance were Lufax Holding (235.2 billion yuan), Qifutech (157.778 billion yuan), and LexinFintech (115.2 billion yuan), with year-on-year declines of 44.8%, 14.5%, and a slight year-on-year increase of 0.9%, respectively.

Looking at the loan amount facilitated in the second quarter, among the six US-listed fintech companies, four saw a year-on-year decline, with a double-digit decline, namely Qifutech, LexinFintech, Lufax Holding, and Xiaowin Technology.

The only one that achieved year-on-year growth is FinVolution, with a loan amount of 48.7 billion yuan in the second quarter, a year-on-year increase of 3%.

Among them, the domestic market is 46.4 billion yuan, a year-on-year increase of 2%.

"Behind the contraction of scale, it is still more about risk considerations.

It is not easy to find suitable assets in the current environment, and stability is still the main focus," a fintech insider told "Caijing."

At present, whether to live well is not the first priority, whether to survive is the key.

In response, most fintech companies are cautious.

"Looking to the future, given that the macroeconomic environment still has many uncertainties, we will continue to manage risks prudently.

We have already seen asset quality gradually improving, and credit demand is also initially showing signs of stabilization," Wu Haisheng pointed out.

Zheng Yan, Chief Risk Officer of Qifutech, further added, "In the second quarter, Qifutech's main leading indicators, the first-day overdue rate was 4.8%, and the 30-day recovery rate was about 86.3%.

Recently, the 30-day recovery rate has further improved, approaching the best level of the past two years."

However, some fintech companies have also stated that they will further promote the growth of loan scale.

Yan Dinggui, chairman of Jiayin Technology, said, "After observing for several consecutive quarters, Jiayin Technology believes that the overall market environment is improving, which provides favorable conditions for the company to accelerate business growth in the future.

Looking forward, Jiayin Technology will continue to promote the continuous development of the company's performance through technological innovation and strategic business exploration."

Xiao Wenjie also revealed that looking ahead to the second half of the year, LexinFintech will continue to adhere to the principle of prudent operation, with risk management as a priority, focusing on the following work: first, on the basis of risk returning to the normal range, promote steady growth of scale, and comprehensively improve profitability; second, make good use of the company's differentiated advantages in scenarios, enhance user stickiness, and improve user activity; third, actively promote the accelerated development of overseas business, and closely monitor and explore more emerging market opportunities."

Accelerating technology and going overseas When asset quality is under pressure and customer acquisition costs continue to rise, technological capabilities become an important tool for fintech companies to consolidate existing businesses: by increasing the application of technologies such as artificial intelligence (AI) and large models, to achieve cost reduction and efficiency improvement.

Financial reports show that LexinFintech's R&D investment in the second quarter was 143 million yuan, a sequential increase of 6%.

It is reported that in the risk management scenario, LexinFintech's "Gauss" CDP platform combined with the full-process model matrix "Star River" model cluster has achieved automatic creation and launch of user tags, reducing the feature release time from 10 minutes to 30 seconds, and improving the agility of risk management.

Qifutech continues to improve its ability to serve small and micro businesses through technological innovation.

Public information shows that through the continuous accumulation of massive data and fine-tuning of models, Qifutech's industry information coverage rate has steadily increased from 95.1% at the end of the first quarter to 96.7%.

In addition, it has successfully mined and supplemented industry information for 6.89 million small and micro users.

Ping An Puhui Financing Guarantee Co., Ltd. (hereinafter referred to as "Ping An Guarantee"), a subsidiary of Lufax Holding, has helped banks serve small and micro businesses through the financing guarantee model.

Financial reports show that by the end of the second quarter, the risk-bearing proportion of Lufax Holding's loan balance has increased to 56.7%.

In the first half of the year, Ping An Guarantee served 125,000 small and micro business owners.

It is also understood that Ping An Guarantee has created AI loan solutions such as "Xingyun" through AI empowerment of digital operations, digital risk control, and digital processes, making the business loan process more convenient and efficient, reducing process breaks by 50%, and 90% of loan applications are credited within 1.5 hours, with a 31% increase in timeliness.

In addition to "rolling technology," going overseas is still a new growth point that fintech companies are focusing on.

For example, FinVolution, which has implemented a global strategy for seven years, has established deeply localized fintech platforms in Indonesia and the Philippines, and has carried out technology service business in the Latin American region.The data shows that in the second quarter of this year, Xinye Technology's international business achieved a transaction volume of 2.3 billion yuan, a year-on-year increase of 27.8%.

The international high-quality customer base continued to expand, with new borrowing users accounting for more than the domestic market.

Among them, the Philippine business's transaction volume increased by 140% year-on-year in the quarter, and it further expanded its cooperation with local financial institutions and leading e-commerce platforms in Southeast Asia.

There are also "latecomers" whose overseas business has begun to show results.

The data shows that LexinFintech achieved a 61% sequential increase in loan scale in the Mexican market in the second quarter, with a 113% increase in revenue.

It is reported that based on the initial success in the Mexican market, the company has made overseas business an important strategic direction and is promoting its accelerated development.