Orix Corp has invested $60 million in peer-to-peer lending platform Dianrong, in what is the Japanese financial firm’s first investment in a Chinese fintech venture as it looks to tap into the fast-expanding sector, sources said.
Japanese insurers and banks have been actively trying to invest in fintech startups amid threats to their established business from the emergence of “disruptive” services using technologies such as artificial intelligence and blockchain.
Along with Orix, CLSA, the overseas platform of China’s Citic Securities, is putting another $10 million into Dianrong, said the sources who have direct knowledge of the matter, bringing total investment in the P2P firm to $70 million.
“We should pay more attention to fintech startups in China. There are so many and they are growing so fast,” said a senior executive at one of Japan’s biggest life insurers, which was not involved in the Dianrong deal.
Unsecured consumer lending via Chinese online platforms more than tripled in 2016 to almost $140 billion, according to a report by the Cambridge Centre for Alternative Finance.
Such lending, of which cash loans are a significant portion, dwarfs similar activity in the rest of the world combined, accounting for over 85 percent of all such activity globally in the year before last, a report said.
But Beijing has been forced to take measures to regulate online financial activity following a spate of scandals, frauds and high-profile P2P failures.
Dianrong was launched in 2012, after which it expanded into services such as supply-chain financing using blockchain, as it looked to grow beyond the crowded Chinese market.
The Shanghai-based firm raised $220 million from Singapore’s GIC Pte Ltd and other investors in August. It did not disclose its valuation at the time.
Co-founded by Soul Htite who was also behind U.S. online lender LendingClub Corp, Dianrong already has big backers including the private equity arm of Standard Chartered and technology-focused investment firm Tiger Global Management.
Orix, through its investment, is hoping for possible joint ventures when Dianrong launches businesses in other Asian countries, said the sources, who did not want to be named as they were not authorised to speak to media.