X Financial (NYSE: XYF)

X Financial is a leading online personal finance company in China. It connects borrowers on its platform with institutional funding partners using proprietary big data-driven technology. The company facilitates loans to prime borrowers through a robust risk assessment and control system. Its main product category is Xiaoying Credit Loan, which includes Xiaoying Card Loan and other unsecured loan products. Xiaoying Card Loan is the flagship product offering a combination of small credit line and attractive annual percentage rate. The business model emphasizes light labor commitment and effective management of transaction and operating costs. X Financial benefits from strong credit performance and accompanying insurance or guarantee protection to expand its user base. Its highly automated risk management system and technology infrastructure enable simultaneous processing of a large number of transactions.

X Financial generates revenue primarily from loan facilitation services and financing income. Loan facilitation service fees are charged for matching institutional funding partners with borrowers and for post-origination and guarantee services over the loan lifetime. Financing income comes from interest on borrowers from its microcredit business and financing fees from loans facilitated through Consolidated Trusts and Partnerships. Service fees are charged indirectly through financial institutional cooperators or directly to certain institutional funding partners. Guarantee companies charge borrowers a guarantee fee, a portion of which is paid to X Financial as service fee. In 2024, loan facilitation services accounted for 52.8% of total net revenues, post-origination services for 12.9%, and guarantee services for 3.4%. Financing income represented 23.5% of total net revenues in the same year. The company’s total net revenue was RMB5,871.8 million in 2024, equivalent to US$804.4 million.

The company operates through the following segments.

• Xiaoying Credit Loan. This segment includes the flagship Xiaoying Card Loan and other unsecured loan products introduced over time. It targets prime borrowers, primarily young consumers in early career stages with insufficient credit lines from traditional issuers. Loan amounts range from RMB500 to RMB50,000 with terms of three, six, nine, or twelve installments. Repayment is typically in equal monthly installments of principal and interest. The transaction process involves mobile application submission, identity verification via OCR and biometric recognition, credit assessment using the proprietary WinSAFE system, approval and funding through institutional partners, and servicing and collection via in-app notifications, SMS, phone calls, and third-party agencies. In 2024, Xiaoying Credit Loan facilitated RMB104,889 million in loans, representing 100% of total loan facilitation amount. The outstanding balance of Xiaoying Credit Loan reached RMB52,302 million as of December 31, 2024.

X Financial holds a leading position in China’s online personal finance industry. It competes with other online marketplaces, online finance service providers, technology giant-backed internet finance platforms, and traditional financial institutions such as credit card issuers and consumer finance units in commercial banks. The company’s competitive advantages include strategic targeting of prime borrowers underserved by traditional institutions, superior user experience through user-friendly application and speedy remittance, effective risk management via its WinSAFE system, strong returns for institutional funding partners, established partnerships with business partners, and brand strength. Its proprietary risk control system integrates data from traditional credit providers and alternative sources like social and behavioral data to assess borrower value, repayment capability, and propensity to repay. This enables differentiated credit limits and a balance between borrower expansion and asset quality control. The company benefits from credit insurance or financing guarantee provided by institutional cooperators, which enhances partner trust and supports favorable funding terms.

X Financial serves prime borrowers in the Chinese Mainland who are underserved by traditional financial institutions. These borrowers are defined as individuals with sound credit history, credit records in the PBOC CRC, and typically no late payment record exceeding 60 days in the previous six months. The company’s main product, Xiaoying Card Loan, targets young consumers in early career stages seeking to supplement their credit lines for consumption needs. As of December 31, 2024, X Financial had 5,231,887 active borrowers, each having made at least one transaction on the platform since the commencement of its loan facilitation business. The number of active borrowers grew from 3,326,774 in 2022 to 4,495,997 in 2023 and further to 5,231,887 in 2024.