Serving the Unbanked Population: a speech by Home Credit China CEO Ondrej Frydrych to the 21st Century Finance Summit of Asia

This speech was originally delivered to the 11th Annual 21st Century Finance Summit of Asia on November 29th, 2016

“70% of HCC’s customers are first-time borrowers. That means they have no record in the credit system.This is exactly where we feel consumer finance should play a role and help the unbanked population be included in the financial service market,” Ondrej Frydrych, CEO of Home Credit China (HCC), said at the 11th Annual 21st Century Finance Summit of Asia on November 29th. Frydrych believes that China’s consumer finance market has massive potential, and the company’s confidence in the Chinese market has led Home Credit China to budget for more investments this and next year to bring HCC’s registered capital to RMB6 billion.

70% of Home Credit’s Clients Are First-Time Borrowers

“Without a doubt, China is a leading global market. If we look at purchasing power, China should be the world’s largest economy. However, the level of consumer financing for native Chinese is still low and there’s huge room for growth. I’m very excited to be able to attend the 21st Century Annual Finance Summit of Asia and share my thoughts about future trends. It should be a very prosperous future for consumer finance.”

Unlike other financial institutions doing everything possible to undercut banks, Home Credit’s main business is to provide financial innovations to people who don’t have access to banking services. “We believe that’s the mission of consumer finance: to provide the unbanked with a way of experiencing financial services; to get them their first loan and repay it on time while providing some financial knowledge,” Frydrych said.

Frydrych said he believes consumer financing benefits not only consumers, but the broader society as well. As China’s economy is very stable with fairly low unemployment, people are very confident about the future despite slowing GDP growth. This is an ideal environment for the consumer finance business. Shoppers can borrow to buy the goods they desire while working to pay them back. At the same time, consumer financing can help with supply-side reforms. Through consumer credit, people can buy phones, vacations, or purchase airline tickets, which all feeds back into the real economy.

Risk management shall concern two aspects

However, Frydrych did frankly say that because the targeted clients are usually unbanked; usually among the bottom 25% in income; possess relatively less education; and mostly under the age of 35, managing risks is essential to the business. HCC needs to address two different types of risks. The first is clients’ repayment capability, because some clients are first-time borrowers who don’t know how much of an instalment they can afford. The other is the small group of people that don’t plan to repay their loans: fraudsters. They apply for loans with no intention to repay. You have to do a very good job in both aspects to be a successful consumer finance company.

Frydrych said the company is very serious about innovating the financial services market. Two of its newest features are a 15-day cooling-off period during which clients can simply cancel their loans if they have second thoughts without any extra fees. The other is accelerating the loan approval. “No one is willing to wait too long, so the speed of approving the loan application in the consumer finance industry is vital. No one is willing to wait until the next day to hear about the decision on their loan application. We now have reduced loan approval times to just several minutes. We can make a decision whether you’re at the store or on the phone; something out clients have come to greatly appreciate,” he said.