The Business Model Analysis of Online Lending Platforms Outside China

Abstract

As the online lending platforms started outside China, the development of online lending overseas brought China’s online lending platforms many valuable experience and enlightenment. As a result, a comparative analysis on online lending platforms inside and outside China seems imperative. At present, overseas platforms primarily provide personal loans and only little to SMEs. The interest rate, in general, is determined in two ways: one is purely auction type through bidding by lenders and borrowers. Another one is determined by platforms according to borrowers’ credit rating. However, in either way, all the platforms’ revenues come from the fees that the platforms charged when the loan transaction is completed through the platform. Online lending can significantly reduce the transaction cost comparing with the traditional lending channels, and allow higher interest rate and better returns for loans with higher risk of default.