5 trillion yuan online lending industry, ushering in the strictest regulation

Ask AI · How will new online lending regulation rules change the industry’s profit model?

“Low-interest loans, instant approval and instant disbursement, no collateral required, monthly interest 0.8%”……

Online lending ads are everywhere. However, while low-interest online lending sounds tempting, it may actually be a high-interest trap. Some lending institutions only promote a monthly interest rate of 0.8%, but they do not mention that borrowers also have to pay a wide range of channel service fees, guarantee fees, and even mandatory bundled account insurance fees.

The good news is that regulators are cracking down hard on high-interest online lending. On March 15, the National Financial Regulatory Administration and the People’s Bank of China issued the announcement 《Provisions on Clearly Stating the Composite Financing Cost for Personal Loan Business》 (hereinafter referred to as 《the Provisions》), which officially launched. It will take effect on August 1, 2026. At the same time, several well-known loan facilitation (assist-lending) institutions were also summoned for talks by the National Financial Regulatory Administration.

The online lending industry is entering the “strongest regulation yet.”

The online lending industry is set for institutional change

Online lending, simply put, is borrowing money through a mobile app or website. Compared with bank loans, online lending has lower barriers, faster procedures, and no collateral requirement, but its interest is usually higher, and it affects credit reporting query records more frequently.

At present, the mainstream model in online lending is an assist-lending model dominated by licensed financial institutions (such as consumer finance companies and online micro-lending companies) together with internet platforms. Under this model, the platform uses its advantages in traffic and technology to handle customer acquisition and assist with risk control, while banks and other licensed institutions provide funding and bear core credit risk.

However, while providing financing convenience, the online lending industry still faces high complaint pressure due to continuing disorder and illegal practices. According to the 《2025 Financial Consumer Complaints Situation Circular》 released by the National Financial Regulatory Administration, in 2025 nationwide complaints related to online lending reached 1.236 million cases. Among them, complaints about collectors using private phone numbers accounted for as much as 68.7%, and complaints about high interest and “head-cut” interest accounted for 21.3%, becoming the two most prominent categories of chaos.

Faced with long-standing industry ills, regulators have taken action.

The 《Provisions》 that will take effect on August 1 this year will implement a “clearly stated composite financing cost”制度. The focus is that institutions must fully disclose the breakdown of interest and fees, the charging standards, and uniformly disclose the annualized composite cost; at the same time, they are strictly prohibited from charging any interest or fee related to the loan in addition to what is disclosed under the clearly stated items. This means regulators have tightened requirements for both online lending front-end marketing and interest/fee disclosure.

This directly targets the “split charging”套路 used by some online lending products. China News Weekly searched the “head-cut interest” (“interest deducted from principal in advance”) on the Black Cat Complaints platform, and found nearly 219,000 related complaints. Related complaints about “loan fraud via ‘cutting the head’” totaled 77,000.

By sorting through the complaint content, China News Weekly found that many online lending products have complex interest-rate calculation systems, making it difficult for ordinary users to accurately calculate costs when borrowing. Often, users only notice anomalies during the repayment process. For example, some lending institutions only advertise a monthly interest rate of 0.8%, but they do not mention that besides this interest, borrowers also have to pay “channel service fees” of 2%–5%, a guarantee fee of 0.3%, and even a mandatory bundled account insurance fee.

One complaint on the Black Cat platform said that a user borrowed 50,000 yuan and 19,800 yuan, respectively, from a certain platform, and when repaying in 12 installments, it was discovered that the platform, without informing the user in advance, additionally charged a high “value-added service fee” (for a 50,000 yuan loan, an additional 11,250 yuan; for a 19,800 yuan loan, an additional 4,455 yuan). If the complaint details are true, then under the bundled-charging scenario, the composite annualized cost of these two transactions exceeds 40%.

Figure/Black Cat Complaints

With the introduction of the 《Provisions》, from a制度 level, it will effectively curb various types of hidden charges, interest/fee splitting, and other violations such as disguised increases in interest rates in the online lending industry.

Wang Pengbo, Chief Analyst at BoCom Consulting, interpreted the 《Provisions》 for China News Weekly, saying the purpose is to build a whole-chain regulatory system. The 《Provisions》 require online loans to be presented with “pop-up windows + mandatory reading + confirmation,” and offline loans to be “signed and confirmed” for clearly stated disclosure. This is a very important step—it can force institutions to reduce issues in the application process where consumers are办理ing loans without knowing, and then being charged additional fees; it also strengthens financial consumers’ right to know and autonomy in decision-making.

There is no doubt that this shatters some online lending companies’ calculations.

A person in the assist-lending industry told China News Weekly that in the past, credit enhancement service fees and guarantee fees were often collected separately by cooperation institutions and were not included in the publicly stated interest rate. For a long time, this was a relatively hidden way of charging in the industry. But this time, the regulator clearly blocked this path.

Profit margins are compressed significantly

In fact, since 2025, regulators have been continuously increasing efforts to rectify high-interest assist-lending businesses. Especially since the implementation of the 《Notice on Strengthening the Management of Internet Assist-Lending Business of Commercial Banks and Improving the Quality and Effectiveness of Financial Services》 (hereinafter referred to as the 《New Assist-Lending Rules》) in October 2025, the industry has undergone fundamental changes.

China News Weekly reviewed business models disclosed by leading assist-lending platforms in their previous financial reports. It found that assist-lending companies in the past mainly used a business model that ran assist-lending matchmaking alongside self-operated lending. Under the joint-lending model, affiliated licensed institutions and banks jointly contribute capital and share risk; under the self-operated model, loans are issued through in-house and integrated funds to generate interest income.

However, the 《New Assist-Lending Rules》 clearly require that banks must conduct independent risk control, prohibit assist-lending institutions from stepping in to make up for defaults, and fully standardize the upper limit of composite financing cost.

Under the new rules, “who lends is responsible.” Banks must do their own risk control. At the same time, stepping-in behavior by assist-lending platforms is prohibited, and the upper limit of composite financing cost must be fully standardized. This makes the previous online lending套路 of “low interest, high service fees” completely stop working, and borrowers’ actual burden is locked into a reasonable range.

More importantly, under these requirements, the annualized interest rate corresponding to the assist-lending business’s composite financing cost (loan interest + credit enhancement service fees + loan-related service fees) must not exceed 24%. And customers with high interest rates above 24% are precisely the platforms’ very important sources of profit.

For the small and micro finance field, expert Ji Shaofeng analyzed for China News Weekly that, based on estimates, the current funding cost for most consumer finance and assist-lending platforms is 3%–5%, traffic cost is 4%–5%, risk cost is 7%–9%, and operating cost is 4%–6%. With an annualized interest rate capped at 24%, profit margins are extremely limited.

Ji Shaofeng further pointed out that from an industry structure perspective, among the roughly 5 trillion yuan balance in online lending today, about 800 billion yuan—16% of the total—falls in the high-interest band of 24%–36%, mainly concentrated in mid-tier and lower platforms. These high-interest businesses now have only two choices: adjust to meet compliance standards or exit the market.

“This means that under the new assist-lending rules, the business models of mid-tier assist-lending institutions that rely on stepping-in to compensate for defaults, joint-lending arrangements, and heavy capital profit-sharing will collapse quickly. A large number will exit within one year, and financing and guarantee companies will be cleared in batches,” Ji Shaofeng said.

Another internal person from an assist-lending company told China News Weekly that after the new rules took effect in August, high-interest assist-lending businesses with annualized rates above 24% have completely disappeared. Previously, the industry generally implemented an interest rate cap of 36%, leaving profit margins clearly compressed. “Not only are profit margins compressed, but some products need compliance-oriented redesign. This directly leads to widespread pressure on industry performance in the fourth quarter of 2025.”

Looking at leading public assist-lending companies listed in the US stock market, the industry’s operational pains are very evident.

Qifu Technology’s 2025 fourth-quarter financial report showed that revenue for the period was 4.093 billion yuan, down 8.7% year over year. Net profit was 1.016 billion yuan, down 46.8% year over year. Among them, the core platform service net revenue was only 0.661 billion yuan, down 58.5% year over year. Revenue from lightweight-capital loan matchmaking fees and referral fees both fell sharply.

Lexin’s full-year 2025 total operating revenue was 13.152 billion yuan, down 7.4% year over year. In the fourth quarter, the amount of loan origination matched by matchmaking was 50 billion yuan, down 3.8% year over year. Revenue from traditional credit facilitation services was significantly hit by pricing compliance and the impact of business model transformation.

Xinyi Technology’s trading volume in the 2025 fourth quarter was only 42.8 billion yuan, down 24.8% year over year. Loan balance at the end of the reporting period was 70.9 billion yuan, down 6.2 billion yuan from 77.1 billion yuan at the end of the previous quarter. Correspondingly, revenue in the fourth quarter was 3.024 billion yuan, down 12.5% year over year. Net profit was only 0.416 billion yuan, falling 44% from the 0.75 billion yuan peak in the second quarter earlier in the year.

Yingke Technology’s revenue and net profit both declined sequentially in the 2025 third quarter. Single-quarter net profit fell 20.2% sequentially. At the same time, the 31–60 day delinquency rate rose from 1.02% in the same period last year to 1.85%, and the 91–180 day delinquency rate rose to 3.52%. Risk provision and asset impairment pressure increased in parallel.

The reshuffling is still ongoing

And this time, the “strongest regulation” combination for online lending continues.

Since the beginning of 2026, multiple departments have issued a series of policy documents, forming a policy package. The new rules cover the entire spectrum, including debt collection behavior, interest rate caps, platform qualifications, and debt negotiation. They set rigid red lines, clarify regulatory standards, and aim to completely rectify industry chaos and push the online lending industry toward compliant transformation.

On March 13, the Financial Regulatory Administration released a circular stating that for problems in the internet assist-lending business, it held talks with five platforms, including Fenqile, Qifu Jiebei, Niwoidai, Yixianghua, and Xinyifei. The operating entities behind them were Lexin, Qifu Technology, Jiayin Technology, Yiren Zhike, Xinfeng Technology, and others, respectively.

Figure/Official website of the National Financial Regulatory Administration

The new requirements given by regulators are very direct: when platform operating institutions carry out lending business in cooperation with financial institutions, they should effectively standardize marketing and promotional behavior, clearly and explicitly disclose information about interest and fees for lending products, strictly comply with personal information protection regulations, conduct debt collection in accordance with law and regulations, improve customer complaint resolution mechanisms, and effectively protect the lawful rights and interests of financial consumers.

The online lending industry’s structural reshuffling is still underway.

On the one hand, small and medium-sized banks are publicly tightening cooperation. Urumqi Bank has already completely stopped issuing cooperative personal internet consumer loans since October 1, 2025. In the list disclosed by Heilongjiang Bank on November 5, 2025, the only cooperation institution status was also “cooperation has been stopped.” Weihai Lanhai Bank paused 40 of the 68 cooperating institutions listed in an updated roster in March 2026… These measures caused many small and medium online lending companies that relied on bank funding to exit the market faster due to “credit supply cutoffs.”

On the other hand, the cleanup of historical violations related to charging fees has already begun in a substantive way. Driven by both regulatory summoning for talks and user complaints, several platforms have, after the regulatory talks in March 2026 and the rollout of the new rules, already started large-scale withdrawal of violations and fee rectification. Specifically, they have opened official refund channels to address violations such as the portion with composite annualized interest rates above 24% during 2023–2025 and forced add-on charges for membership fees/guarantee fees, covering both unsettled and settled existing orders.

According to incomplete statistics, since 2026, more than ten places have announced the deregistration of small loan companies, including Gansu, Chongqing, Hainan, Beijing, Shanghai, Yunnan, Guangdong, Hunan, Sichuan, Jiangsu, and Zhejiang, among others. In these 11 regions, the total number of deregistered/cleared small loan companies is about 80.

A research report from CITIC Securities pointed out that the number of online lending platforms was about 5,970 at the peak in 2017. After years of strict regulation and clearing, by 2026 only about 80–100 licensed compliant institutions remain. The industry scale shrank by more than 98%. Unlicensed and non-compliant small and mid-sized platforms exit in batches, and concentration continues to increase.

Wang Pengbo judged that short-term adjustments and long-term reshaping in the online lending industry are happening at the same time. On the one hand, short-term industry scale faces pressure, institutions’ profitability declines, and cooperation shrinks—these are the norm. On the other hand, in the long run, it will force the industry to return to its assist-lending roots and focus on inclusive finance positioning.

“In the future, the industry must take the route of licensed operation, independent risk control, standardized cooperation, and scenario-based services, in order to find a balance between compliance requirements and sustainable development,” Wang Pengbo said.

References

《High-interest assist-lending “death ordeal”》，2026-03-22, Economic Observer News

Reporter: Yu Shengmei

(yushengmei1231@126.com)

Editor: Yu Yuan