Trillions of yuan in online lending industry, ushering in the strongest regulation

Ask AI · How Will New Regulations on Online Lending Change Industry Profit Models?

“Low-interest loans, instant approval, no collateral needed, 0.8% monthly interest”…

Online lending ads are everywhere, but the lure of low-interest loans may actually be traps for high interest rates. Some lending institutions only promote a 0.8% monthly interest rate but do not mention that borrowers also have to pay numerous channel service fees, guarantee fees, and even mandatory bundled account insurance fees.

Good news is, regulators are cracking down hard on high-interest online loans. On March 15, the State Financial Supervision and Administration Bureau and the People’s Bank of China announced the “Regulations on Clear Disclosure of the Total Cost of Personal Loan Business” (hereinafter referred to as “Regulations”), which will take effect from August 1, 2026. Meanwhile, several well-known loan facilitation agencies have been summoned by the State Financial Supervision and Administration Bureau.

The online lending industry is entering its “strongest regulatory phase.”

The online lending industry is undergoing institutional reform

In simple terms, online lending means borrowing money via mobile apps or websites. Compared to bank loans, online loans have lower thresholds, faster procedures, and no collateral required, but usually come with higher interest rates and more frequent credit checks.

Currently, the mainstream model is a partnership between licensed financial institutions (such as consumer finance companies and online micro-lenders) and internet platforms—platforms use their traffic and technology advantages to handle customer acquisition and risk control assistance, while banks or licensed institutions provide funding and bear the core credit risk.

However, while providing financing convenience, the industry still faces high complaint pressure due to ongoing irregularities. The “2025 Financial Consumer Complaint Report” issued by the State Financial Supervision and Administration Bureau shows that in 2025, there were 1.24M complaints related to online lending nationwide, with private number collection complaints accounting for 68.7%, and complaints about high interest and “head-cutting” interest accounting for 21.3%, making these the two most prominent issues.

In response to these long-standing problems, regulators have taken action.

The “Regulations” that will be implemented on August 1, 2026, will enforce a “comprehensive financing cost disclosure system.” The key points are that institutions must fully disclose the composition of interest and fees, fee standards, and uniformly disclose the annualized comprehensive cost; at the same time, they are strictly prohibited from charging any additional interest or fees outside the explicitly disclosed items. This means regulators are demanding more detailed disclosure in the front-end marketing and fee transparency of online lending.

This directly targets some online lenders’ “split fee” tricks. A search for “head-cutting interest” (interest deducted from principal in advance) on the Black Cat Complaint Platform shows nearly 219k related complaints, with a total of 77k complaints about “套路贷” (loan scams).

Analysis of complaint content by China News Weekly reveals that many online lending products have complex interest calculation systems, making it difficult for ordinary users to accurately calculate costs at the time of borrowing, often only realizing the anomalies during repayment. For example, some lenders only promote a 0.8% monthly interest rate but do not mention that borrowers also have to pay channel service fees of 2–5%, guarantee fees of 0.3%, or even mandatory bundled account insurance fees.

There are complaints on the Black Cat platform that users borrowed 50k yuan and 19.8k yuan respectively, and during 12 installments, the platform charged extra “value-added service fees” without prior notice (for the 50k yuan loan, an additional 11,250 yuan; for the 19.8k yuan loan, an additional 4,455 yuan). If these complaints are true, under bundled charges, the total annualized cost of these two transactions exceeds 40%.

[Image: Black Cat Complaint]

The introduction of the “Regulations” will effectively curb various hidden charges, fee splitting, and disguised interest rate hikes in the online lending industry from a systemic level.

Broadcom’s chief analyst Wang Pengbo explained to China News Weekly that the purpose of these regulations is to build a comprehensive regulatory system. The Regulations require online loans to be “pop-up + mandatory reading + confirmation,” and offline to have “signed confirmation” disclosures. This is a crucial step, as it can force institutions to reduce the problem of consumers unknowingly taking out loans and being charged extra fees during the process, strengthening consumers’ right to know and autonomous decision-making.

This undoubtedly disrupts some online lenders’ “calculations.”

An industry insider told China News Weekly that in the past, credit enhancement service fees and guarantee fees were often charged separately by partner institutions and not included in the publicly disclosed interest rate, making them a covert form of fee. The new regulations explicitly close this loophole.

Profit margins are being significantly squeezed

Since 2025, regulators have been intensifying their crackdown on high-interest loan facilitation. Especially after the implementation of the “Notice on Strengthening the Management of Commercial Bank Internet Loan Assistance Business and Improving Financial Service Quality” (hereinafter “New Loan Assistance Regulations”) in October 2025, the industry has undergone fundamental changes.

China News Weekly reviewed the business models disclosed in the financial reports of leading loan facilitation platforms. It found that these companies mainly used a dual model of facilitation and self-lending—under the joint lending model, licensed institutions and banks co-invest and share risks; under the self-lending model, they issue on-balance-sheet loans using their own or pooled funds to earn interest.

However, the “New Loan Assistance Regulations” clearly require banks to conduct independent risk control, prohibit facilitation platforms from guaranteeing repayment, and fully regulate the upper limit of comprehensive financing costs.

Under the new rules, “who lends, who is responsible”: banks must conduct their own risk control. Meanwhile, facilitation platforms are banned from providing guarantees, and the comprehensive financing cost (interest + credit enhancement service fees + related service fees) must not exceed an annual rate of 24%. High-interest clients paying above 24% are a major profit source for platforms.

Jiqi Shaofeng, an expert in microfinance, analyzed for China News Weekly that most consumer finance and facilitation platforms currently have funding costs of 3–5%, traffic costs of 4–5%, risk costs of 7–9%, and operational costs of 4–6%. At a 24% annual rate, profit margins are very limited.

He further pointed out that, from an industry structure perspective, out of about 50 trillion yuan in total online lending balances, the high-interest segment (24–36%) accounts for roughly 8 trillion yuan, or 16%, mainly concentrated in mid-tier and lower-tier platforms. These high-interest businesses now have only two options: adjust to meet compliance standards or exit the market.

“This means that under the new facilitation regulations, business models relying on guarantees, joint lending, and heavy capital sharing will rapidly collapse, with many exiting within a year, and a large number of guarantee companies clearing out,” said Shaofeng.

Another internal source from a facilitation company told China News Weekly that after the regulations took effect in August, high-interest facilitation business above 24% has disappeared entirely. Previously, the industry’s interest rate cap was 36%, but profit margins have been sharply squeezed. “It’s not just profit compression; some products need to be reformed to comply, which has put pressure on industry performance in Q4 2025.”

Looking at top listed companies in the US stock market, the pain in the facilitation industry is evident.

Qifu Technology’s Q4 2025 financial report shows revenue of 219k yuan, down 8.7% year-on-year, with net profit of 77k yuan, down 46.8%. Core platform service revenue was only 660 million yuan, a 58.5% plunge, with deep declines in loan matching and referral service fees.

Lixin’s total revenue for 2025 was 50k yuan, down 7.4%. In Q4, loan facilitation volume was 50 billion yuan, down 3.8%. Traditional credit facilitation income was significantly impacted by pricing compliance and mode transformation.

Xinyeshike’s Q4 2025 transaction volume was only 42.8 billion yuan, down 24.8% year-on-year. The loan balance at the end of the period was 70.9 billion yuan, a decrease of 6.2 billion from Q3. Correspondingly, Q4 revenue was 19.8k yuan, down 12.5%, and net profit was only 416 million yuan, a 44% drop from the Q2 high of 750 million.

Xiaoying Technology’s Q3 2025 revenue and net profit both declined sequentially, with net profit down 20.2% quarter-on-quarter, and overdue rates of 31–60 days rising from 1.02% to 1.85%, and 91–180 days overdue rising to 3.52%. Risk provisions and asset impairments also increased.

The reshuffle continues

And this time, the strongest regulatory combination in online lending is still ongoing.

Since the start of 2026, multiple departments have issued policies forming a policy “combo,” covering collection behaviors, interest rate caps, platform qualifications, debt negotiations, and more, setting strict red lines and clear standards to thoroughly rectify industry chaos and promote compliant transformation.

On March 13, the Financial Supervision and Administration Bureau announced that it had summoned five platforms—Lianli, Qifu Borrowing, Niwo Loan, Yixianghua, and Credit Fei—whose operators are Lixin, Qifu Technology, Jiayin Technology, Yiren Zhike, and Xinfei Technology, respectively.

[Image: Official website of the National Financial Supervision and Administration Bureau]

The new requirements are straightforward—platform operators working with financial institutions must strictly regulate marketing, clearly disclose loan interest and fee information, strictly protect personal data, conduct collections legally and compliantly, improve customer complaint mechanisms, and effectively protect consumers’ rights.

The industry’s structural reshuffle is ongoing.

On one hand, small and medium banks are tightening cooperation. Urumqi Bank stopped issuing cooperative personal internet consumer loans entirely from October 1, 2025. Longjiang Bank’s only remaining partner, as disclosed in November 2025, is “ceased cooperation.” Weihai Lanhai Bank also suspended 40 out of 68 partner institutions in March 2026. These measures have led many small online lenders relying on bank funds to exit quickly due to “loan cuts.”

On the other hand, the cleanup of past illegal charges has begun in earnest. Under regulatory interviews and user complaints, many platforms have started large-scale refunds and rectifications after the March 2026 regulatory meetings and new rules, targeting violations such as interest rates exceeding 24%, forced bundling of membership or guarantee fees, etc., with official refund channels covering both unsettled and settled orders.

Incomplete statistics show that since 2026, over a dozen small loan companies have been officially deregistered or cleared in regions including Gansu, Chongqing, Hainan, Beijing, Shanghai, Yunnan, Guangdong, Hunan, Sichuan, Jiangsu, Zhejiang, totaling about 80 companies.

CITIC Securities’ research report notes that the number of online lending platforms shrank from a peak of about 5,970 in 2017 to only 80–100 licensed compliant institutions in 2026—a reduction of over 98%. Many unlicensed and non-compliant small platforms have exited in batches, with industry concentration continuing to rise.

Wang Pengbo believes that the online lending industry is undergoing both short-term adjustments and long-term reshaping. In the short term, industry scale, profitability, and cooperation will face pressure; in the long term, the industry will be pushed back to its core functions of facilitation and inclusive finance.

“Future development must focus on licensing, autonomous risk control, standardized cooperation, and scenario-based services to balance compliance requirements and sustainable growth,” Wang said.

Reference materials

“High-interest facilitation’s ‘life and death’,” March 22, 2026, Economic Observer

Reporter: Yu Shengmei

(yushengmei1231@126.com)

Editor: Yu Yuan