U.S. Credit-Score Firm FICO Betting on China Surge in P2P Loans

Fair Isaac Corp., the U.S. firm known for credit scores, said it’s willing to lose money initially to grab a share of the market for services in China’s booming online peer-to-peer lending industry.

“We want to put our risk management know-how in the place where it’s most needed -- Internet finance in China -- even though for us it’s a money-losing business for now,” Sandy Wang, director of P2P solutions for the Californian firm’s China unit, said in an interview in Shanghai this week.

The New York-listed company known as FICO is trying to grab a share of services for an industry where transactions surged almost 13-fold since 2012 to $41 billion in 2014, according to Yingcan Group, which tracks the data.

Since February, more than 40 customers paying 100,000 yuan ($16,100) each have adopted FICO’s cloud-based “alternative lending platform,” which lets them make loan decisions in less than a second, Wang said. FICO will need to attract more clients to recoup costs and start making money, Wang said, without giving details of the breakeven point.

Risks are mounting in an industry that’s unregulated for now. At least 90 percent of platforms will fail in the next few years because of high costs and poor risk management, Wang Kun, chief executive officer of the platform Duanrong.com, said June 10. The industry has a bad-loan ratio of about 8 percent and a default ratio of more than 20 percent, Wang estimated.

Over 2,500 online platforms in China are scrambling to manage risks. Tiger Global Management is among investors in what U.K. investment bank Liberum Capital Ltd. says is the world’s biggest P2P industry.

FICO has operated in China since 2007, with customers including big banks and insurers.

— With assistance by Jun Luo

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