ByteDance's Consumer Loan Business Surges, Catching Up With Major Chinese Banks

BEIJING, February 29 (TMTPOST)—ByteDance's credit business has experienced rapid expansion, catching many by surprise.

Recent reports suggested that "ByteDance and other ByteDance-affiliated companies have a loan balance of nearly 400 billion yuan." Subsequently, ByteDance's subsidiary Shenzhen Zhongrong Small Loan Co., Ltd. responded, saying that this was inaccurate information. However, ByteDance has not officially disclosed the precise data. Industry insiders told TMTPost that ByteDance's loan balance exceeded 300 billion yuan as of the end of 2023.

Comparatively, as of the end of June 2023, China Construction Bank's personal consumer loan balance was 368.802 billion yuan, and China Merchants Bank's consumer loan balance was 272.351 billion yuan.

In the consumer loan market, by leveraging TikTok’s huge traffic, ByteDance seems to have achieved a rapid catch-up in scale with established consumer finance leaders, including major banks.

As the only financial license helder of ByteDance group, Zhongrong Small Loan has received continuous capital injections in recent years.

On December 29, 2023, Zhongrong Small Loan underwent a change in business registration information, increasing its registered capital from nine billion yuan to 19 billion yuan, becoming the leader in registered capital among small loan companies.

For comparison, internet companies such as ByteDance, Meituan, Tencent, JD.com, and Baidu all have small loan companies, with Tencent's Caifutong Small Loan having the highest registered capital at 10.526 billion yuan, albeit significantly lower than Zhongrong Small Loan.

According to the "Interim Measures for the Administration of Online Micro-loan Business (Draft for Comments)," the balance of non-standardized financing, such as bank borrowing and shareholder borrowing, for small loan companies engaged in online micro-loan business should not exceed one time its net assets. The balance of standardized debt-type financing, such as bonds and asset securitization products, should not exceed four times its net assets.

This means that theoretically, the new upper limit for Zhongrong Small Loan's balance of non-standardized financing, such as bank borrowing and shareholder borrowing, is 19 billion yuan. The new upper limit for the balance of standardized debt-type financing, such as bonds and asset securitization products, is 76 billion yuan, with a combined upper limit of nearly 100 billion yuan.

Ji Shaofeng, founder of the China Micro-credit Institution Business Innovation Cooperation Alliance, told TMTPost, "ByteDance will likely strive to obtain a consumer finance license in the future, and it may also try to get a banking license. However, the requirements of banks' controlling shareholders are high, and internet platforms are unlikely to obtain complete control. Moreover, banking business cannot focus mainly on stimulating consumer credit."

Regarding the surge in ByteDance's loan balance, several industry insiders said that they are not surprised. "TikTok has a massive ecosystem, and with a huge traffic, expanding credit business is easy," said Ji.

Currently, TikTok's daily active users (DAUs) have surpassed 800 million, and ByteDance's traffic has surpassed Alibaba, second only to Tencent, which owns WeChat. At the same time, the e-commerce business is booming, with TikTok claiming a 277% year-on-year increase in GMV (Gross Merchandise Volume) in 2023. Regarding Zhongrong Small Loan's latest capital increase, the relevant person in charge stated that this move aims to enhance support for small and micro-enterprises within the TikTok ecosystem.

After accumulating a massive user base on the TikTok platform, ByteDance has become a crucial channel for banks and consumer finance institutions for advertising and customer acquisition.

ByteDance made its foray into the financial field since 2015 and has acquired various financial service licenses through mergers and acquisitions since 2017, including insurance brokerage, securities advisory, payment, online micro-loans, commercial factoring, and financing guarantee.

In 2020, TikTok further advanced its e-commerce business, focusing on three major financial service sectors: third-party payments, online micro-loans, and insurance brokerage. These services are mainly deployed around the e-commerce business. The main financial products it launched include the third-party payment tool "TikTok Pay," credit consumer loan service "TikTok Monthly Payment," and credit loan services for consumers and small and micro-enterprises, such as "Trustworthy Borrowing." It also provides various insurance products underwritten by cooperative insurance companies, such as return shipping insurance, plant care insurance, and allergy insurance.