Hong Kong P2P lending startup gets $20M funding as it breaks into mainland China

Hong Kong-based fintech startup WeLab announced this week it closed a US$20 million series A funding round from DST Global founder Yuri Milner, ICONIQ Capital, and Ule, along with previous investors Sequoia Capital and TOM Group.

WeLab originally raised $14 million announced in June 2014, and today adds the additional US$6 million from the three new investors.

WeLab’s flagship product is WeLend, the first peer-to-peer lending service in Hong Kong, founded in 2013. In the second half of last year, the startup entered mainland China, and it has processed over US$120 million in loan applications.

P2P lending startups have exploded in mainland China, with dozens of competitors receiving huge funding rounds. Notably, Beijing-based Renrendai closed one of the biggest series A rounds of 2014 at US$130 million.

P2P lending, also called social lending, democratizes the money borrowing process, allowing anyone to invest their savings by becoming a lender, and lowering the barrier to entry for borrowers. But even though the business model is the same, WeLend marketing manager Rachel Lam says Hong Kong and mainland China are two distinctly different markets.

"They are indeed very different. Hong Kong has a very comprehensive regulatory landscape, credit bureau database, well-developed fraud detection system, and collection facilities, thus lending is a highly competitive yet profitable business," Lam says. "On the contrary, China has huge potential for business growth because of its population and unfulfilled loan needs, while we can take part in building the infrastructure for risk management and fraud detection."

In addition to WeLend, WeLab also operates Wolaidai, a mobile P2P lending platform for top-tier university students in China. These small loans range from US$50 to US$500. Lam says Wolaidai "has witnessed over 100 percent month-on-month growth for three consecutive months."

WeLab says this latest investment will support its expansion into China and improve its credit risk technology. That’s an important asset in China, where credit ratings are not available to private companies. WeLab says it plans to launch two or three more products in China and one to two more products in Hong Kong this year.

See: SoftBank gets in on China’s P2P lending craze with $10 million investment in Edai