In recent years, "Internet + Finance" has subverted traditional finance due to its low cost efficiency and convenient operation, and Huabei and credit cards have also become one of the payment methods for daily consumption.

Edit Introduction: Changes in consumption concepts and habits have become the consumption trend in the future society. In recent years, "Internet + Finance" has subverted traditional finance due to its low cost efficiency and convenient operation, and Huabei and credit cards have also become one of the payment methods for daily consumption. This article will experience Huabei and credit cards, analyze its product functions, and take a look together.

1. Research background

In recent years, "Internet + Finance" has subverted traditional finance due to its low cost efficiency and convenient operation. The post-90s and post-00s have strong ability to accept new things (online lending), becoming half of consumer credit. The transformation of consumption concepts and changes in consumption habits have become the future social consumption trend.

Consumer Credit, it is a consumer finance company that issues loans of different quotas based on user transactions and other credit data, and borrowers use funds to make advance consumption. With the development of the Internet, the matching model with e-commerce consumption guides consumers to choose transaction installments or bill installments. Ant Huabei, JD White Tickets, and credit cards have gained a large number of choices, becoming one of the payment methods for daily consumption.

2. Experience environment

Product: JD.com joint credit card PLUS version ( Yuntong ) Huabei

Experience version: Palm Life V8.5.10 Alipay V10.2.38

Experience model and system version: Huawei P20 Android 10

3. Product overview

3.1 Credit card

The essence of a credit card is a small credit loan, and its funds come from public deposits, financial bonds and funds allocation between different branches of the same bank. Credit cards provide domestic and overseas services, and domestic services can be used in advance in physical stores and online stores; overseas services, that is, overseas credit cards issued by domestic banks for use abroad, such as visa cards.

credit card payment and repayment support 3 forms:

1. transaction installment business
2. interest-free bill (repayment) business
3. bill installment (repayment) business, that is, choose to repay principal and interest in installments or based on the minimum repayment amount

3.2 Huabei

Huabei is essentially a small-scale credit loan, and its funds come from own assets, issuance of ABS and joint loans. The operating entity of Huabei is Chongqing Ant Consumer Finance Co., Ltd. , and the investor is Chongqing Ant Small and Micro Small Loan Co., Ltd. Its payment and repayment support is three forms:

) transaction installment business. Users can usually choose to divide the period 3/6/9/12/24, with the actual annualized interest rate (IRR) between 13.54% and 15.23%; and Jufang product has been launched to support users to bind credit card installment payments when trading in installments in Huabei;
1. ) interest-free bill (repayment) business.

) bill installment (repayment) business. Users can usually choose to divide the period 3/6/12, with the actual annualized interest rate (IRR) between 14.92%-15.84%.

4. Market analysis

As of 2020, the balance of China Consumer Credit ex-mortgage loans was 14.5 trillion yuan, contributing 14% of GDP. (The data comes from the official account - First Consumer Finance), the payment method of quota consumption is affecting people's lives.

4.1 User scale consumption lifestyle

html Post-190s and post-00s have gradually become the main consumer force, aged between 18 and 32 years old; post-90s have become the main social force, and post-00s have gradually entered the workplace.

From Figure 1-Consumer loan age distribution, post-90s account for 49.3% of consumer loan users. In addition to mortgage loan products, mortgage loans and car loans, consumer loan products include credit cards, cash loans (such as Jiebei Huabei), and commodity loans. Mobile payment affects the consumption habits and lifestyles of the post-90s and post-00s.

If there is no pressure from mortgage or car loan, advanced consumption will be the first choice because it reduces a lot of constraints; in life, you can invest more funds in home appliances (smart), pets (meow and Wang), health ( hair loss ), beauty (medical beauty), and entertainment (script killing) to improve quality of life and satisfaction.



Figure 1-Age Distribution of Consumer Loans, from: https://www.jiemian.com/article/6740477.html



Figure 2-Post-90s consumer loan scenarios, from: https://www.jiemian.com/article/6740477.html

4.2 Credit card market

Credit cards are in a "stall" state, and the increase in card issuance volume has slowed down, with an average annual growth of 100 million from 2016 to 2018, and the increase has been halved to 32 million from 2019 to 20 years. Overall, the scale of credit card issuance has gradually increased. At the end of June 2021, the cumulative number of cards issued reached 790 million, a month-on-month increase of 1.5% and a year-on-year increase of 4.5%. The credit card business model is gradually shifting from incremental to stock, from customer acquisition to mining consumption scenarios and user operations.

The COVID-19 pandemic in 2020 has accelerated the onlineization of bank credit card business, especially in June 2021, with more than 90 million active online users. In September this year, the mobile life APP under , , had 44.41 million active users, twice the Puda Xiben APP under Pudong Development Bank.



Figure 3 - Active scale of credit card online users, from: https://www.analysys.cn/article/detail/20020285

4.3 Huabei business/market



Huabei business is divided into 4 parts, the capital side, consumer finance service provider, user side, supplier side (seller side)

(1) The capital side

Huabei’s lending entity is Chongqing Xiaowei Small Loan Co., Ltd., which mainly engages in consumer installment loan business. Its funding channels come from ABS, joint loans and owned assets. Consumer finance can be seen in details: Ant Financial's overall environment and the real Huabei interest rate algorithm: https://zhuanlan.zhihu.com/p/419222999

(2) Consumer finance service provider

Ant Financial established Chongqing Ant Consumer Finance Co., Ltd. in June 2021, that is, the operating entity of Huabei.

(3) User

• user credit application for Huabei products, risk control personnel will rely on Alipay Sesame Credit to pass/reject credit application.
• Huabei users Huahuabei, consume the funds spent by different investors in purchasing ABS in advance, and spend their own money when they finally repay.
• Huabei users use the credit limit to pay. After the payment is successful, you can enjoy the service or wait for delivery.
• transaction installment business, users can usually choose to divide the period 3/6/9/12/24, with the actual annualized interest rate (IRR) between 13.54% - 15.23%

(4) The supplier/seller side

• seller ships and processes returns and refunds according to the orders whose payment method is Huabei.
• is subject to regular settlement with consumer finance companies based on successful payment and successful returns. The consumer finance company pays the order amount that the supplier paid successfully; the supplier pays the order amount that the consumer finance company paid successfully the order amount that the return refund was made successfully. The settlement amount and settlement method follow the contract between the two parties.
• seller may be the payment entity of Huabei payment channel. The final state is based on the user's confirmation of receipt, and the consumer finance company is paid to the transaction amount based on the rate ( Tmall 0.8%, Taobao 1%). What is the profit model of Alipay’s “Huabei”? – A Plain’s answer – Zhihu https://www.zhihu.com/question/27790965/answer/307096920

5. User analysis

5.1 User portrait

According to the 2017 "Debang Huabei No. 49th Consumer Credit Financing Asset Support Special Plan" and the Huabei product analysis report of Zhihu netizens, users under the age of 30 who use the bill installment function contributed about 62% of the loan balance, and the user group aged 30 to 45 accounts for 34% of the balance. For those who use Huabei to trade installments, under 30 years old accounts for 57% of the total balance.

Figure 4-2017 Huabei bill installment installment (including interest-free period 1) user age distribution, accounting for % loan balance

Reference: Huabei product analysis report 1: https://zhuanlan.zhihu.com/p/57251935



Figure 5-2017 Huabei transaction installment users, accounting for % loan balance

Reference: As above

6. Product core function

6.1 Credit card core function - minimum repayment amount

Minimum monthly repayment amount

Credit card minimum repayment amount, that is, the minimum amount that customers must repay every month to ensure that the account is not frozen. If the full amount cannot be paid off on the repayment date, the minimum repayment amount will be paid on time and will not affect personal credit.Generally speaking, the minimum repayment amount of a credit card is 10% of the current bill, which is calculated at 5% of the daily interest bill. If the minimum repayment amount is always the case, it will be profitable. Let me give you a brief example. The date of

bill generation: November 15, 10,000.

repayment date: December 3.

paid only the minimum repayment amount of RMB 1,000 (10,000*10%) on December 3, and the unpaid principal of the user was RMB 9,000. Because the repayment date is not fully paid off, cannot enjoy the interest-free period benefits of credit card. The 18-day interest must be settled and the interest shall be calculated based on the principal of the current bill (October 16-November 15); the daily interest shall be 5% to the end of the repayment date. In addition, the user will have to pay interest even if he has not paid the principal of RMB 9,000.

pays the bill on December 5 (October 16-November 15), the bill amount = unpaid principal + 18 days interest (at 10,000 principal) + 2 days interest (at 9,000 principal)

,000+10,000*18*0.05%+9000*2*0.05%

6.2 Huabei core function - Transaction installment

directly put the example. Buy a 75ml small brown bottle for 1,150 yuan. The installment fee and period number are from Taobao screenshots. Taking the 3 periods as an example,

principal = 1150

principal per period = 1150/3=383.33

handling fee per period = principal * handling fee rate/counter period, i.e.: 8.82

handling fee calculation formula = principal and interest/principal -1=2.30% i.e. 2.30%



Suppose I borrowed 1150 yuan from Huabei, and a total of 1176.42 yuan will be paid back three months later, and the three periods will be 2.30%. When you see that Huabei is only a few points, it is easy to place an order impulsively. But in fact, the real loan interest rate for Huabei installments is as high as more than a dozen points, that is, the real interest rate is not the handling fee rate.

Because the principal and interest have been paid in one period, 392.14, and there is still 766.67 yuan in principal left. The handling fee rate for the third period is calculated at 1150, that is, the handling fee for each period is 1150*2.30%/3=8.82.

150 is split into X(1), X(2), X(3)

in the first month, X(1)=1150 saved for 1 month, 1150*(1+r)=392.14

in the second month, X(2)=766.67 saved for 2 months, 766.67*(1+r)^2=392.14

in the third month, X(3)=383.33 saved for 3 months, 383.33*(1+r)^3=392.14

combined with these three formulas, the monthly interest rate can be calculated.

or use the IRR formula (internal rate of return internal rate of return). Huabei spent 1,150, and then recovered 392.14 in the next three months. Use EXCEL formula and IRR formula. The annualized interest rates of the four installments of



are 13.75%, 15.23%, 13.55% and 13.77% respectively. This interest rate is being tested on the red line of usury.

7. Product iteration strategy

In the Internet finance industry, Huabei, Jiebei, JD Baitiao is already a mature high-quality financial product in the vertical field, and relying on the transaction scenario/mall business of e-commerce platforms is the advantage of developing credit business.

The essence of JD Baitiao is also a small credit consumer loan product. The initial stage of Baitiao is the accounts receivable of JD Finance , and this money is the accounts payable of JD Mall ; although it has the risk control model and user scale, it depends on the mall system/supply chain account period. Since Baibiao has scaled up ABS, its capital cost has decreased and its dependence on malls has decreased.

is like Baitiao, Jiebei, and Huabei. The amount of users' advanced consumption is the money spent by other investors on purchasing ABS. From another perspective, Ant Financial and JD Finance sell the money lent to users to a group of investors on a large scale through ABS, and ABS can be traded on exchanges; that is, doing business without capital. The funds of microfinance come from their own assets, ABS, and joint loans, and the cost of funds is reduced and the benefits brought by high leverage are increased.

According to First Consumer Finance, the customer pricing was set at the end of June 22, clearing more than 24% of the products, that is, the APR can only be <24%>

micro-credit consumer loan ecosystem is gradually taking shape.

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