Internet-facilitated lending entering new phase

A year after China tightened rules governing internet-facilitated lending, the once rapidly expanding sector is now entering a new phase, marked by shrinking bank partnerships, tighter risk controls and rising compliance demands.

As banks reduce their reliance on online platforms, leading lending-assistance providers are increasingly repositioning themselves as technology service companies rather than traffic and funding intermediaries.

Issued by the National Financial Regulatory Administration, the "Notice on Strengthening the Management of Internet-Facilitated Lending by Commercial Banks and Improving the Quality and Efficiency of Financial Services" officially took effect on Oct 1, 2025, prompting small and medium-sized lenders to undertake major overhauls of their internet-facilitated lending businesses.

Internet-facilitated lending mainly refers to a cooperation model in which licensed financial institutions rely on third-party internet platforms for functions such as customer acquisition and risk-control support.

The NFRA said that regulating commercial banks' internet-facilitated lending business is an important measure taken by the administration to comprehensively advance risk prevention, strengthen supervision and promote development. Strengthening the regulation of internet-facilitated lending will help ensure that commercial banks continuously improve their compliance standards, better leverage the positive role of such services, and effectively protect the legitimate rights and interests of financial consumers.

Now, one year after the rules took effect, the direction of the industry is becoming increasingly clear. China's leading lending facilitation platforms are generally making a return to the core of technology services being the focus of their rectification efforts, proactively scaling back areas of ambiguity in their previous business models.

Zeng Gang, director of the Tianfu Liyan Financial Research Institute, said, "As a landmark regulatory document in the online lending sector, the new regulations do not merely restrict the industry's development; their core purpose is to clarify the boundaries of rights and responsibilities among banks, lending facilitation platforms and credit enhancement institutions, reinforce the primary responsibility of licensed financial institutions for risk management, and guide the loan facilitation industry from traffic-driven scale expansion toward a new phase of high-quality development characterized by controllable risks and a balance of rights and responsibilities."

In recent years, financial regulators have introduced a series of measures requiring lending institutions to take full responsibility for risk management, while addressing problems in online lending such as mismatched rights, responsibilities and benefits, unreasonable pricing mechanisms, and inadequate protection of financial consumers' rights and interests. In line with the regulatory direction, many lending institutions have been systematically reducing their reliance on lending facilitation platforms.

The latest lists of partner institutions disclosed by banks show that internet-facilitated lending businesses have contracted significantly, although strategies vary from bank to bank.

Privately owned banks have made the most sweeping adjustments. With relatively few offline branches and a weaker customer base, China's private banks had previously been the most dependent on internet-facilitated lending channels, and have therefore made the sharpest cuts. For example, customer-acquisition partners of Jilin Yillion Bank Co, the first privately owned bank in Northeast China, fell from 56 in November 2024 to 10 in July 2026, a decline of more than 80 percent.

Zeng said the implementation of the new lending facilitation rules has already begun to meet regulators' expectations, as reflected in the shrinking number of partner institutions, tighter platform access requirements, the return of core risk-control functions to banks and adjustments to business models.

He said the previously extensive growth model of using lending facilitation platforms as a substitute for banks' own retail capabilities is being corrected.