PPDAI Group Inc. (Paipaidai) is a leading online consumer finance marketplace in China with strong brand recognition. Launched in 2007, Paipaidai is the first online consumer finance marketplace in China connecting borrowers and investors, whose needs have not been met by traditional financial institutions. Paipaidai was ranked No. 1 among China's online consumer finance marketplaces in terms of the number of borrowers as of December 31, 2016 and June 30, 2017, according to iResearch. As of December 31, 2017, Paipaidai had over 65 million cumulative registered users and as a pioneer in China's online consumer finance marketplace industry, Paipaidai benefits from its early-mover advantages and the invaluable data and experience accumulated throughout multiple complete loan lifecycles.
Paipaidai's platform, empowered by proprietary, cutting-edge technologies, features a highly automated loan transaction process, which enables a superior user experience, as evidenced by the rapid growth of its user base and loan origination volume.
Paipaidai strategically focuses on serving borrowers between the ages of 20 and 40, a demographic typically more receptive to internet financial services and poised to become the driving force of China's consumer finance market. Borrowers on Paipaidai's platform reside in 97% of the cities and counties in China and many have limited or no credit history. Paipaidai primarily offers short-term loans to the borrowers to meet their immediate credit needs, while allowing them to gradually establish their credit history through activities on the platform. In 2016 and the six months ended June 30, 2017, loans originated on Paipaidai's marketplace had an average principal amount of RMB 2,795 and RMB 2,347, respectively, and an average term of 9.7 months and 8.2 months, respectively. Borrowers come to Paipaidai for convenient, simple and fast loan transaction processing. A borrower may submit a loan application anytime, anywhere using mobile or PC devices and receive a credit decision in as little as one minute. Leveraging proprietary algorithms, Paipaidai is able to effectively match borrowers' loan requests with investors' investment demands and provide borrowers with prompt funding. The smooth and expedient user experience contributes to Paipaidai's high levels of borrower stickiness.
Paipaidai's platform also appeals to investors by offering a wide spectrum of investment options. Paipaidai provides investors with an opportunity to invest in an emerging asset class - consumer loans - through a variety of investment options. Investors may subscribe to loans based on the profiles of approved borrowers listed on the platform, use automated investing tools specifically designed to improve their investment efficiency, or enroll in investment programs that cater to different investment preferences. Paipaidai offers attractive risk-adjusted returns supported by a set of risk management procedures and implements protection mechanisms to control and mitigate investors' risk exposure. To meet investors' liquidity demands, Paipaidai has also established a secondary loan market to facilitate their early exit.
Additionally, Paipaidai has built an extensive database that contains first-hand through-the-cycle credit data as well as data from various third-party sources. Paipaidai distills over 1,000 variables to present a 360-degree user profile of its borrowers. As of December 31, 2017, Paipaidai had approximately 10.5 million unique borrowers. Paipaidai has established systematic risk management procedures that have proven to be effective in various macro-economic environments. Paipaidai's proprietary and big-data based credit scoring model, the Magic Mirror Model, represents one of its key competitive advantages. As the core component of our risk management procedures, Paipaidai is continually testing and refining its credit decision-making rules and continues to study the increasing amount of data accumulated through Paipaidai's loan facilitation.
Paipaidai generates revenues primarily from fees charged to borrowers for Paipaidai's services in matching them with investors and for other services Paipaidai provides over the loan lifecycle. With the growing wealth of China's large consumer base, the increasing willingness of China's young generation to spend, as well as new internet-based business models, China's household consumption shows favorable growth prospects.