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Lianlian links Hangzhou United Bank to e-commerce exporters

The Chinese payments company is wooing banks with a big-data solution to invoice financing for online cross-border trade.



Pan Guodong, Lianlian

Lianlian Pay, the Chinese payments company, is launching a product to provide financing to mainland e-commerce sellers that operate on foreign online stores such as Amazon.

Banks have always been reluctant to extend loans to such business, and the U.S.-China trade war has made it almost impossible.

Does this make sense? Not to Chinese cross border e-commerce sellers, most of which have not been affected by the trade dispute: US tariffs apply only to orders valued at more than $800, according to Li Zhiqiang, CFO of Youkeshu—a leading e-commerce company based in Shenzhen.

Last year, about 39% of best sellers on Amazon were made in China; and up to 90% of e-sellers operated on Wish, another U.S. e-tailer, were from China. In fact, in 2018 China’s cross-border e-commerce transactions reached Rmb9 trillion ($1.3trillion).

However, banks are not involved in this market. The problem isn’t politics: it’s authentication. The problem isn’t new but it’s getting worse.

“In 2015, we just finished raising Rmb100 million,” Li Zhiqiang told DigFin. “I knocked the doors of all banks along [Hong Kong’s] Des Voeux Road all day long, trying to open an account for Youkeshu, with no success.”

The problem is that e-commerce players can’t provide paper records from customs, even if they could, banks could’t possibly verify all those records.

Youkeshu, for example, sells 100,000 orders a day of low-value goods, usually in the $5 to $10 range. Its export documents only confirm there has been an order placed with the original Chinese manufacturer, not an e-tailer such as Youkeshu.

Lianlian’s new play

LianLian introduced Link, an Alibaba-like platform to help Chinese merchants sell abroad. But whereas Alibaba got its start as a B2B facilitator for overseas merchants, Lianlian is catering to Chinese e-commerce companies that deal with end consumers overseas.

This is a growing market segment. Last year, Amazon attracted 1.2 million new sellers, of which more than 40% are from China.

“Chinese merchants found that with platforms like Amazon and Wish, they can skip overseas retailers and sell directly to end customers,” said Pan Guodong, Lianlian Pay’s CEO. But while customers like buying things online, “The support for sellers is still offline and old-fashioned.”

A typical cost sheet for a Chinese merchant selling abroad includes the final price of the good (about 30% of the total), warehousing and logistics (another 20% to 25%); marketing (10%) and fees to overseas platforms such as Amazon (up to 15%); and other costs, including payment fees.

Lianlian Link puts all the services online in one place, so merchants can compare and select these services individually. It also include marketing solutions for sellers such as targeting online celebrities.

Bring in the banks

Having built the portal, Lianlian is now in talks with banks to offer loans to sellers via the platform, Pan said.

“Banks can expand business with e-commerce sellers using Lianlian’s data,” Pan told DigFin. “They can therefore verify the authenticity of trades and understand trends of the seller’s business; say, for example, whether sales are growing or declining.”

Hangzhou United Bank has joined as the first partner. This institution is part of United Rural Commercial Bank, a federation of rural banks under the Zhejiang provincial government with a combined deposit base of Rmb2 trillion ($295 billion). Lianlian is likewise based in Zhejiang province, which is the wealthiest in China; its leading city, Hangzhou, is also home to Alibaba.

Chai Leiying, general manager for small and micro loans at Hangzhou United, told DigFin it designed a loan product for Lianlian’s users to help them get past the long delay in getting cash settled after shipping goods; this normally takes around 45 days. The Hangzhou United loan can extend from one to 90 days, with daily interest of 0.02% to 0.04%. The seller can return the cash anytime.

To apply for a loan, though, sellers must authorize the bank to verify their data on Lianlian. Lianlian and Hangzhou United separately run risk controls on the application, but the process takes only a few seconds. “The customer can hardly notice it,” Chai said. Approval is based on the seller’s history of trading on Lianlian, along with traditional credit history.

Once approved, the seller downloads an app from Hangzhou United and takes a selfie, to verify their identity and link it to that loan. Yang Qi, business developer at Hangzhou United, says face-recognition technology enables an online account with the bank to be opened in less than one minute.

Finally, when a seller needs quick cash, they just click a button on Lianlian’s page. The bank’s algorithm calculates an amount based on the seller’s account receivable.

Hangzhou United’s Chai says she is looking to collect more data in order to classify e-tailers, so she can identify which she can offer larger loans at lower interest rates.

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