Consumer Finance Taps Sinking Increment

Traffic has transformed from a popular business into an even more popular one.

Recently, the popular online literature content reading service platform, Qimao Novels, has launched a "borrow money" feature. This feature can be found under "Qimao Novels Apple APP - My - Borrow Money." Previously, several internet platforms such as Feizhu and Xianyu have also introduced "borrow money" services on their home pages.

As an important entry point for financial institutions, top-tier internet platforms have almost become a "standard" for loan referral services. From giants with a complete range of business forms to vertical and niche platforms, the migration path of financial institutions' traffic channels has also outlined the changing trends of market environment and risk control strategies.

An institution cooperating with traffic platforms told a reporter that although first-tier internet platforms have a first-mover advantage in traffic monetization, emerging platforms like Qimao have their unique user base and market positioning. Under the pressure of market decentralization and customer acquisition, they have the potential to become new traffic entrances.

However, this wave of "handshake" between finance and traffic is quite cautious and low-key. After the reporter sent an interview letter to the Qimao platform and its partners, the "borrow money" feature can no longer be found in the Qimao Novels Apple mobile client.

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Finding "New" Scenarios

"Many people around me use this kind of novel reading software, and the cooperating institutions should be targeting the high monthly active users (monthly active user numbers) of platforms like Qimao in the lower market." An insider from an internet financial technology platform said to the reporter.

A report released by the Literature Research Institute of the Chinese Academy of Social Sciences in Beijing recently showed that by the end of 2023, the number of online literature users in China reached 537 million, a year-on-year increase of 9%, and the scale of the online literature reading market has exceeded 40 billion yuan.

At the same time, the dividends of the traditional consumer finance traffic pool are indeed declining. Public information shows that the total assets and operating income of many financial institutions have declined in the first half of 2024. The "battle" for loan scale and asset scale has already begun, and in order to reverse the decline of the reduction in stock, increment has become a must-fight place.

A person close to the financial institution's traffic deployment business department said that if new scenarios are discovered and entered as soon as possible, a first-mover advantage can be obtained. "We are also deploying through agents on multiple platforms at the same time."A journalist has learned from the aforementioned internet financial technology platform that banks currently have a very strong demand for the asset side. "Many large banks have approached us for cooperation, hoping to gain more increments to maintain a stable scale. The cost of acquiring a new customer in the past was 1000-1500 yuan, but now it can reach 3000-4000 yuan."

Many practitioners believe that although more and more internet platforms want to get a share of the pie, the performance of most platforms has not improved significantly. This wave of financial traffic monetization may last for a period, but how long it can last depends on the operational capabilities of each platform and the market environment.

The journalist learned that even for platforms with high monthly activity, if they only focus on pure traffic guidance rather than from a licensed perspective, the main cooperation method is still based on traffic settlement.

A financial institution practitioner in the South China region said that the current mentality of various parties in placing financial loan advertisements is mainly to try, whether it is a top platform or a mid-to-bottom platform, as long as the quotation and effect are relatively matched, financial institutions can accept it.

"The migration trend of traffic investment will focus more on personalization and precision in the future. With the evolution of technology, advertising investment must be more intelligent, and the content must be more matched with user needs." The aforementioned institution said.

Wang Peng, a researcher at the Beijing Academy of Social Sciences, told the journalist that this round of financial traffic monetization of internet platforms can be seen as another wave in the field of internet finance. From a deep-seated perspective, on the one hand, technological maturity and regulatory improvement provide a more stable and secure environment for internet platforms to carry out financial business. With the development of big data, artificial intelligence, and other technologies, internet platforms can better assess user credit and control risks, thereby carrying out financial business more effectively. On the other hand, the gradual improvement of regulatory policies also provides clearer business rules and compliance guidance for internet platforms.

"In addition, financial traffic monetization has high profit potential. For internet platforms looking for new growth points, the development of financial business can bring new sources of income and improve the overall profitability of the platform. At the same time, the continuous growth of market demand is also an important reason for driving internet platforms to join the financial traffic monetization." Wang Peng added.

Many practitioners also believe that improving profitability and monetizing traffic is one of the most important considerations for internet platforms, and for financial institutions lacking fresh traffic, it can be said to be a match made in heaven.

Pay attention to interest rates and customer group matching

It is worth noting that some new traffic platforms are still relatively cautious about financial monetization. After discovering that QiMao removed the "borrow money" entry, a partner told the journalist: "They seem to have removed all the advertising spaces related to finance (withdrawn).""The Qi Mao platform has been running loan referral advertisements for about two months now, without any financial cooperation, similar to performance advertising, which yields relatively less revenue, and has also attracted public opinion attention," revealed a person involved in the partnership.

One reason for this "caution" is that, under the current macro environment, there is a trend of declining asset quality in the consumer finance market. As the customer base shifts downwards, the corresponding risk control strategies also face adjustments.

A mid-level employee from an internet finance platform stated that the borrowing customer base has its peculiarities and cannot be simply migrated (deployed) across various platforms. There are significant differences among customer groups with different interest rates, so special attention is needed when traffic is directed towards financial loan monetization. At the same time, this also involves legal and compliance issues, requiring platforms to strictly adhere to relevant regulations during their operations to ensure the legality and security of their business.

"In financial loan monetization, the level of interest rates directly affects the choice of the borrowing customer base. Platforms need to fully consider the characteristics of the customer base when setting interest rate strategies to ensure the sustainability and profitability of the business. At the same time, this also requires platforms to have an in-depth understanding and analysis of the market environment, competitors, and their own operational capabilities to formulate appropriate interest rate strategies," the aforementioned mid-level employee said, noting that interest rates between 24% and 36% might cater to similar groups, but if it's 10% to 18%, the differences could be vast.

Wang Peng frankly stated that the gradual saturation of the consumer finance market and the intensification of competition is a trend that cannot be ignored. As more and more internet platforms join the ranks of financial traffic monetization, market competition will become even more fierce. This will lead to increased customer acquisition costs, compressed profit margins, and other issues, posing challenges to the sustainability of financial traffic monetization.

Furthermore, changes in regulatory policies may also affect the sustainability of financial traffic monetization. Wang Peng believes that if regulatory policies become stricter, they may impose certain restrictions and impacts on the financial business of internet platforms, thereby affecting their ability to monetize financial traffic.

He pointed out that the level of interest rates not only directly affects the platform's profitability and risk control capabilities but also relates to the user's borrowing costs and repayment pressure. Therefore, platforms need to consider a variety of factors when setting interest rates to achieve a reasonable match between interest rates and customer groups. For example, platforms can use data analysis to understand the borrowing needs and repayment capabilities of different customer groups, thereby formulating more reasonable interest rate policies. At the same time, platforms can also adjust interest rate levels based on market competition and user feedback to improve user satisfaction and loyalty.

"Directing traffic towards financial loan monetization requires platforms to pay special attention to the peculiarities of the borrowing customer base and the matching of interest rates with customer groups. Only by achieving precise matching and risk control, formulating reasonable interest rate policies, and other measures to meet user needs, enhance platform profitability, and achieve sustainable financial traffic monetization," further added the person involved.