The introduction of Huabei and the comparison of advantages and disadvantages

Part 3

Huabei is the full name of Ant Huabei, a consumer loan product created by Ant Financial. Following the launch of the application, Ant Huabei provides users with consumption limits ranging from 500 to 50000 based on a big data calculation and risk control model that considers consumers' online purchasing, payment behaviours, and credit risks.

Ant has only been out for a month, yet it already has over 1.5 million merchants on Tmall and Taobao. Ant Huabei has been mostly utilised for online shopping since its official inception, and many consumers prefer it. According to big data analytics, in China, those born in the 1990s use 33 percent of the ant Huabai, those born in the 1980s use 48.5 percent, and those born in the 1970s use 14.3 percent. Ant Huabei has garnered more new generation customer groups than other payment options (WANG, J. and Li, Q., 2021).

There are many ways for Ant to make money by spending. First, Alipay's spending can benefit from the interest, which is mainly expected users. There is no way for ant to make profits by paying back on time. Secondly, pay treasure to spend bai service charge to the Taobao sellers, if buyers use bai payment, according to trade finance from seller’s charge fees, Taobao sellers charge 1% rate that just like a credit card fee rate, this is a big profit, the cost-cutting when confirming the delivery of the consumer, the rest into the merchants’ pockets. Third, Taobao consumption is linked to Huabei. The use of Huabei can promote Taobao consumption and increase the profits of both. And revenue from late fees. The product advantage of Huabai is also obvious, which enables people without credit cards and stable income to have an overdraft limit. When shopping online, the payment method becomes simple and convenient to use. Free use of consumption limit for shopping allows you to buy things you like in advance (Kow, Y.M., et al., 2017). Repayment is convenient, including automatic repayment, repayment in advance, installment repayment and other repayment methods. However, the disadvantage of bai is also obvious. It is mainly used for online shopping, and the overdraft limit is not as big as credit cards, so it is inconvenient to buy large items. It will also be easy to let some low-income people develop bad consumption habits (2021).

Small loans are a type of consumer credit that focuses on individuals or businesses. The loan amount is usually between 10,000 and 200,000 yuan. The conduction process needs to do assure commonly. Microfinance is the technological and practical expansion of microfinance. China's small loans are applicable to small and medium-sized enterprises and individuals in underdeveloped areas and those who cannot immediately obtain working capital from banks or the government at the initial stage, which gives great support to the development and progress of small and medium-sized enterprises. In addition, many companies offer personal loans to their office workers that do not require credit checks, most of which require no collateral or declaration (Zhou, Y. and Zhang, Q., 2019). This kind of customer general credit status is general, net assets less, in general is higher credit risk. However, the application speed of small loans is fast, the credit investigation requirements are not high, and there are many kinds of loan companies, which can be selected greatly. But it has also led to more credit traps. Secondly, it has high-interest rate and high penalty interest rate. When issuing loans, the borrowers' credit investigation is not sound, and the auditing standard is low. Many people's repayment ability is insufficient, which leads to repayment failure and then a high penalty interest rates (Bai, C.E., et al., 2006).

Reference list:

WANG, J. and LI, Q.,2021 The Asian Dimension Reflection of Hofstede’s Cultural Theory—Based on the Consumption Cognitive Characteristics of Chinese Post-90s College Students.

Kow, Y.M., Gui, X. and Cheng, W., 2017, September. Special digital monies: The design of alipay and wechat wallet for mobile payment practices in china. In IFIP Conference on Human-Computer Interaction (pp. 136-155). Springer, Cham.

Zhou, Y. and Zhang, Q., 2019. Disruptive online service innovation in the presence of competition among disruptors: the case of 3rd-party online payment. International Journal of Services Technology and Management, 25(3-4), pp.384-403.

Bai, C.E., Lu, J. and Tao, Z., 2006. Property rights protection and access to bank loans: Evidence from private enterprises in China. Economics of transition, 14(4), pp.611-628.