Western fintechs cater to Chinese students' needs

By CECILY LIU | China Daily UK | Updated: 2016-11-28 18:02

Western financial technology companies are seizing the opportunity presented by surging numbers of Chinese students studying abroad to offer them loans and money transfer services.

UK-based Prodigy Finance, once it realized Chinese students could not get loans from British banks, even with high credit reliability, began funding tuition and living expenses.

"We think Chinese students will be a big growth area," said Ricardo Fernandez, a director at Prodigy Finance. "Traditionally, Chinese students study abroad with loans from other family members or government scholarships. But they are now starting to become familiar with the concept of a student loan."

What makes Prodigy Finance different from the big banks is its in-house system of calculating students' ability to make repayments, based on factors such as the university attended, future likely salary and exam scores.

So far, it has lent money to about 300 Chinese students, with a repayment rate of more than 99 percent.

Its Chinese student clients have attended some of the world's top universities, such as INSEAD, Columbia, Yale, London Business School, Oxford and Cambridge. Students pay loan rates of 5-8 percent, depending on what credit rating Prodigy calculates for them, based on criteria such as the student's university and their exam grades.

Those who lend students money through Prodigy, mainly education focused funds, earn returns of 4-6 percent.

Meanwhile, Bostonbased fintech firm Flywire is giving Chinese students a channel to send tuition fees directly to universities in order to speed up transfers, benefit from favorable exchange rates, and track the movement of funds.

Flywire advertises itself as offering the best exchange rates on the market, and offers to match any competitor's rates at the student's request.

Flywire and Prodigy's work reflects huge growth in the financial technology industry, particularly since the 2008 financial crisis.

Fintech is the financial service sector in which technology-driven companies produce solutions to challenge the traditional banking industry.

"What's most remarkable, of course, is that the services carried out by Flywire and Prodigy are being made available by non-banks, rather than traditional consumer lending organizations," said Howard Yu, a professor of strategic management and innovation at IMD Business School in Switzerland.

Yu said the reason no Chinese financial technology firms had so far tapped into this market was because it needs global networks and perspective.

Chinese financial technology firms could find new opportunities by leveraging their own expertise, which is in user data analysis, Yu said.

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