More bad news for China’s P2P lending startups

Photo by Mike Poresky

One is a fluke, and two is a coincidence, but three is a trend. If that old saying is true, then it’s more troubling news for Chinese P2P lending startups. Yet another bank has joined China Merchants Bank and Agricultural Bank of China in shutting down payment connections to P2P lending sites. News broke Wednesday that suggests China’s Bank of Communications has joined the blockade, asking third-party payment providers to stop allowing users to buy P2P lending products via the bank’s cards.

This policy hasn’t been officially announced by Bank of Communications, so there’s still hope it could be a rumor, but at least one P2P lending firm has already announced to customers that they can no longer connect and pay using Bank of Communications cards.

And there could be more trouble on the horizon. In the industry, rumors are spreading that a fourth major bank, China Construction Bank, is also planning to close down payments to P2P sites via third-party payment systems. And separately, China’s State Council has publicly announced that local authorities should watch the P2P lending industry “closely” for signs of lawbreaking.

The good news for P2P lending startups – all 2,600-plus of them – is that Spring Festival is just around the corner. Spring Festival is China’s biggest holiday, and business in the country grinds to a virtual halt as the nation collectively heads home (in the largest annual human migration on earth) to spend the holiday with family. So, although it seems like banks and regulators are just piling on the bad news this week, that’s about to stop for at least a week or so, and that could give everyone enough distance from the Ezubao fiasco to slow the growing anti-P2P-lending tide.

Still, with banks piling on and regulators pledging to take a hard look at this industry, this is likely to be a nerve-wracking holiday for China’s P2P lending founders and the VCs who’ve invested in them.