Striking the right balance

Timely help

Over the past few years, China has witnessed a surge of mobile payment users with the number exceeding 520 million, according to Ant Financial. In the second quarter of 2017, Chinese banks dealt with 8.6 billion payments from mobile services, a 40.5 percent increase from the previous year, according to the People's Bank of China.

Since 2014, Chinese tech giants started to focus their attention on millennials. Alibaba and JD launched their pay-by-credit services Huabei and Baitiao in 2014 and 2015 respectively. One in four of those aged between 18 and 27 in China use credit services offered by Ant Financial, according to the company.

Zeng Gang, director of banking research at the Institute of Finance and Banking under the Chinese Academy of Social Sciences, says the development of technology and financial services in the country has been reshaping people's concept of consumption. The pay-by-credit service has been widely embraced by consumers, especially the younger generations.

"The younger generations are no longer satisfied with traditional consumption patterns," he says.

"They tend to be more open-minded toward online credit services."

Younger people are used to online shopping and usually don't meet the minimum wage requirements to apply for credit cards. These service can help see them through the rainy days.

Even though three years have passed, Li Wei remembers how pay-by-credit services helped him with his budding media business in 2015.

The 24-year-old graduate from the University of International Business and Economics has been an entrepreneur. In his freshman year, he opened an online shop, and later became the owner of an e-commerce business and a gaming studio.

"What's interesting about being an entrepreneur is the opportunity to solve challenging issues," he says.

Li mastered his English skills by watching TV shows from the United States. In his senior year, he spotted the English language learning values behind such shows, so he decided to launch a startup recommending high-quality US dramas on Chinese social media.

But then, Li's gaming business went bankrupt, which left him almost penniless. As a student, Li found it difficult to get a credit card. However, he ruled out borrowing money from his parents through his desire to remain financially independent or cause them any worry.

Unlike traditional credit lines, where Li would have needed a series of documents to support his financial status, to qualify for Huabei, he was only required to present a good record of his financial activity on Alipay.

This record mainly depended on Li's Sesame Credit (Ant Financial's credit-scoring system) ranking, which includes his credit history, social network and ability to abide by the contract in general. Users can spend up to 50,000 yuan over 41 days with the option to pay it back over a period of three to 12 months at different interest rates.

In May 2015, Li was granted 7,000 yuan by Huabei. He used the money to turn a basement into an office space. The most expensive item he purchased was a 2,000 yuan wooden table, to provide his team members with a good environment to work. He relied on his virtual credit for about three months to help support the startup.

With a surge of followers in a few months, Li's media business turned out to be a big success. In December, his startup was acquired by Shanghai Liulishuo Information Technology Ltd, an "artificial intelligence plus education" company. Li joined the company as a product manager.

Li says for young people who have entrepreneurial dreams but face financial hurdles, such pay-by-credit services can be crucial in helping their new businesses to take off.

"It brought me opportunities," says Li. "Without Ant Credit Pay, I really don't know how I would have secured my startup funding."