The Status Quo and Case Analysis of Internet Financial Model


The Internet was born in the United States, and the financial systems of European and American countries are relatively complete and mature. Therefore, the integration of China’s traditional financial system and the Internet is earlier and more advanced than other countries in the world. Due to the lack of a sound regulatory system and a weak sense of innovation, China’s Internet finance is still in the stage of imitating the development of European and American models.

The main modes of Internet finance in Europe and America can be roughly divided into six categories: Internet payment, P2P online lending, crowdfunding, Internet banking, Internet securities and Internet insurance.

Generally speaking, the mode structure of China and foreign markets is basically the same, but compared with foreign direct Internet banking, direct insurance and online discount brokers which have formed a certain scale, China is still in the initial stage of exploration. In other models, exploring its development path in developed countries and identifying the similarities and differences between China’s own characteristics and the current situation will help people who pay attention to China’s Internet financial investment to clear their minds and see the future investment and development direction.

Internet payment

Currently, the world’s leading third-party payment companies include PayPal, Google wallet, GlobalCollect in the Netherlands and Worldpay in the UK. PayPal is the world’s largest Internet third-party payment company. It is a subsidiary of U.S. e-commerce giant eBay, which was founded in December 1998 and is headquartered in SAN jose, California. There are now more than 100 million registered accounts worldwide. PayPal is positioned as the most effective payment tool in cross-border transactions.

When it comes to Internet payments, you need to plug in a money market fund from an Internet third-party payment company. Take PayPal in the United States as an example. Here is a brief review. PayPal is the originator of Internet money market fund. PayPal launched a money-market fund less than a year after its founding in 1999. Similar to yu ‘e bao in China, users only need to open a money fund account to earn monthly income, which is popular with many users. After 2000, however, as interest rates in the United States fell sharply, it became difficult to maintain existing incomes. PayPal had to give up management fees and even subsidies from time to time to maintain the income of money funds. With interest rates rising sharply after 2005, the size of PayPal money funds peaked at $1 billion in 2007. However, after the financial crisis, the federal reserve implemented ultra-low interest rate policy, which led to the whole money market fund industry faced difficulties again. PayPal’s money fund went public in July 2011 after more than a decade.

The investment institute believes that because of the early development of the U.S. financial industry, an efficient, stable and secure payment system has been established. The most typical example is the credit card. The establishment of American credit card system depends on the establishment of a safe and mature personal credit system, sound infrastructure, advanced Internet technology and supporting financial regulatory measures. Credit card consumption has been easy to cover almost all areas of consumption, so local consumers are new payment methods (such as PayPal and other online payment systems), which are not attractive, resulting in insufficient innovation motivation of payment system.

In recent years, with the technological innovation of mobile Internet and smart phone, as well as the explosive growth of mobile social platforms, americans begin to realize that there is a huge space for the development of mobile payment system based on mobile social platforms. Mobile payment comes into being. As a supplement of Internet payment, the perfect network infrastructure in developed countries provides a good hotbed for the development of mobile payment. Mobile payment itself can significantly improve the user experience and reduce the cost of swiping card.

Therefore, the mobile payment field is a key battlefield in today’s world. In addition to PayPal, larger players include Google wallets, Square, Stripe, and more. Take Square as an example to introduce the mobile payment business model.

Typical service: plaza

Square is a mobile payments startup founded in San Francisco in December 2009 by Twitter co-founder Jack Dorsey that focuses on mobile payments for individuals and businesses. Its two main business systems are Square reader and Square convenient mobile payment. As of December 2011, Square had more than 1 million merchants using its mobile payment service, an eighth of all U.S. merchants that support credit card payments, and it was adding 100,000 merchants a month.

Since its founding in 2009, Square has been a darling of Wall Street. Square has previously been backed by citi ventures and jpmorgan Digital Growth Fund, sequoia Capital, Kleiner Perkins, First Round Capital and Marissa Mayer. David Viniar, Goldman’s former chief financial officer, joined Square’s board in October 2013. Square has raised $341 million and its valuation is rising rapidly. Square was valued at $5bn in its most recent funding round.

Square’s profit model is simple. Its main source of revenue is transaction fees charged to users, currently 2.75% of each transaction. At the beginning of 2012, the annual turnover reached $4 billion and the actual revenue exceeded $100 million. The main costs are :1) transaction commission paid to the bank; 2) hardware cost of square card reader; 3) team development and operation costs.

The potential value of “mobile payments” provided by Square solves the problem of direct capital transactions between merchants and individual users. At the same time, Square provides transaction management, consumer and merchant interactions, mobile social networking and other value related to payment and daily life.

2. P2P network loan

The business model of P2P online lending first appeared in Britain. In March 2005, Zopa, the world’s first P2P online lending platform, was established in London. Prosper and Lending Club, America’s two biggest online P2P lenders, went online in 2006 and 2007 respectively. This model, which was more convenient and flexible than bank lending, was quickly replicated around the world, with Auxmoney in Germany, Aqush in Japan, Popfunding in South Korea, Comunitae in Spain, Uppspretta in Iceland and Fairplace in Brazil.

Typical business: loan club

Founded in 2006, Lending Club pioneered peer-to-peer Lending in the United States. Lending Club offers borrowers an online Lending platform where investors can buy bonds backed by loan repayments. It is registered with the securities and exchange commission and offers secondary market loan transactions.

Prosper, another American P2P giant, was shut down by the government in 2008 but recovered in 2009. It is now about half the size of Lending Club. Lending Club has so far secured about $2.4bn in deals, secured a $150m investment from Google earlier this year and plans to list in the us in 2014.

The operating model of Lending Club is as follows:

Between the borrower and the investor, the loan club first evaluates the borrower’s credit rating, then determines the loan interest rate and loan term based on the credit, and finally reviews the loan demand for the investor to browse and select on the website, including the total loan amount, interest rate and customer rating. After registering on the site, investors choose their own investments based on their preferences and decide on the amount to be allocated to each borrower, which should be no less than $25. However, there is no direct exchange of funds between the investor and the borrower, but the beneficiary certificate issued by the platform corresponding to the borrower’s loan. Therefore, there is no direct debtor-creditor relationship between the two parties, which is a process of loan asset securitization. After the investor determines the investment target, the bank issues the loan borrower through the designated bank (WebBank), and the bank immediately sells the certificate in the form of P2P loan company, and obtains the beneficiary certificate of the fund investor’s payment platform.

The borrower pays directly to the Lending Club platform at the time of repayment, which is paid to the investor after deducting the management fee and other fees. The investor’s beneficiary warrants can be transferred and traded in a separate investment company; if the transfer is successful, Folio Investment charges the seller 1% of the face value as a handling fee.

The financing fee paid by the borrower to Lending Club is determined by the borrower’s loan level. This fee is included in the borrower’s annual financing costs and is paid in a lump sum before the loan.

For investors, the service fee charged by Lending Club is 1% of the borrower’s reimbursement. If the borrower fails to repay the loan in a timely manner, Lending Club will charge a 30% to 35% fee for the loan that needs to be called.

Lending Club allows lenders to fully consider credit risk and market conditions. The formula for calculating the loan interest rate consists of “baseline interest rate” and “adjustment of risk and volatility”. The latter considers the borrower’s credit score (FICO credit score), credit history, social security number, and so on.

In addition, Lending Club also leverages the trust relationship between friends on Facebook’s social platform to increase Facebook’s membership as an additional credit, thereby increasing credit and security.

3. Fund raising”

The launch of Kickstarter in 2009 was seen by many as a sign of the rise of Internet crowdfunding. In fact, the world’s first crowdfunding site is ArtistShare, also from the United States. The company was founded in 2001 and is known as the “pioneer of crowdfunding finance.”

In recent years, the crowdfunding model has ushered in a golden period of development in Europe and the United States, and its development speed has accelerated, spreading rapidly in other countries and regions. Data show that by 2012, global crowdfunding transactions totaled $17 billion, an increase of 95% year-on-year.

Some representative equity crowdfunding platforms include Crowdcube (the world’s first equity crowdfunding platform) in the UK, Fundable in the US, and Kickstarter, IndieGoGo in the US, and the non-equity crowdfunding platform in Latin America.

Typical business: Kickstarter

Among the many crowdfunding platforms in Europe and America, the Kickstarter, which was established in April 2009, is the most representative. It is currently the largest and most successful crowdfunding platform in the world. Kickstarter achieved profitability in 2010 and successfully funded the founders of startups such as Instagram, Nest and WhatsApp.

Kickstarter In 2013, a total of 3 million users participated in the project, raising a total of 480 million US dollars, raising 1.3 million US dollars, or an average of 913 US dollars per minute per day, more than 800,000 users to participate in at least two projects, 81,000 users support more than 10 projects, However, the total number of successful projects was only 19911. In 2013, users from 214 countries on seven continents, including Antarctica, participated in crowdfunding. Kickstarter is still growing slowly compared to 2012 crowdfunding of 2.4 million users totaling $320 million.

Kickstarter’s self-positioning is “the world’s largest creative project financing platform”, a non-equity comprehensive crowdfunding platform. Its crowdfunding projects are divided into 13 categories: art, comics, dance, design, fashion, film, food, games, music, photography, publishing, technology, and drama.

Kickstarter’s business model involves four mains: financiers, donors, the Kickstarter platform and third-party payment agency Amazon Payments.

Project sponsors post their projects with a predetermined amount of funds, funds, time and different amounts of funds that will generate different benefits, which may be a return sample of the product, which may be the donor’s name added to the project In it, it may be the source code for some projects, but it will never be a return on capital.

Donors invest in projects they like from $10 to $10,000. If a project reaches the financing amount preset by the financing party within the specified time, the financing of the project is successful. After the project is completed, the donor will receive corresponding feedback according to the previous one. Conversely, if the amount of financing does not meet the predetermined criteria within the stipulated time, the funds already donated will be returned to their respective accounts.

Kickstarter will evaluate the project before it is released, and only approved projects will be posted on the site. If the project is successfully financed, Kickstarter will receive 5% of the financing as income. A 5% commission is Kickstarter’s main source of income.

Amazon Payments is the most important fund hosting and trading platform throughout the transaction. Yes

ING Direct USA provides unique services with limited resources to meet the financial needs of this group of customers, resulting in a rapid growth in the number of customers, with more than 100,000 customers after six months of operation. By the end of 2006, ING Direct USA’s customer base had reached 4.9 million, and the growing customer base provided strong customer resource support for its “small profits but quick turnover” business strategy.

ING Direct USA’s product strategy has four main aspects: 1) providing limited product selection for direct sales channels, so that limited product selection is concentrated on savings products and some loan products, customers are easy to try; 2) through association, instant Obtain funds from current accounts; 3) Focus on simplified “self-service” banking products, which can be managed independently by consumers; 4) There is no minimum deposit quota requirement to eliminate customers’ concerns about the minimum amount of deposits.

From the perspective of providing products and services, because there is no offline physical network, the PC web page and the mobile phone mobile terminal are mainly used, supplemented by a small number of offline cafes. The clerk in the cafe can provide consulting services, mainly to enhance the live experience of some customers.

5. Internet Securities

The United States is the earliest country to carry out online securities trading, and is also the country with the most developed online securities trading brokerage business. The US online securities business has risen rapidly with the spread of the Internet and the arrival of the information age. Online securities trading mainly includes four parts: online account opening, online trading, online fund collection and payment, and online sales.

Merrill Lynch, Charles Schwab and E*TRADE are three of the most distinctive US brokerages, each with a distinctly distinctive and successful business model.

Typical company: E*TRADE

Shortly after its founding in 1992, E*TRADE caught up with the second wave of commission cuts in the US and became a pioneer in the US commission price war. Currently, the commission rate is one of the brokers with the lowest commission rate in the service level. Currently, the commission rate is one of the brokers with the lowest commission rate in the service level. In terms of customer stickiness, E*TRADE has been one of the highest-click brokers in the US, more than double the price of its competitor, Charles Schwab. Its characteristics are as follows:

Feature 1: A website-centric marketing system. The reasons for the high E*TRADE hit rate are mainly as follows: First, pay attention to website promotion, and the marketing cost of E*TRADE website is very high. Second, the E*TRADE website has a clear and easy-to-use interface, which is very popular among customers. Third, E*TRADE adopts the vertical portal of the financial and securities industry to provide customers with a wealth of network information covering banking, securities, insurance and taxation.

Feature 2: Expansion of all-round retail outlets. Since 1997, E*TRADE has begun to expand its global market, and has entered into Australia, Canada, Germany and Japan with the strategic alliance of America 0nline and Bank One; then it has entered the United Kingdom, South Korea and Hong Kong and other countries and regions. At the same time, E*TRADE has expanded its retail outlets to establish five “finance centers” in the United States, distributed in New York, Boston, Denver, Belgian Hills and San Francisco; and across the country’s “Financial Zones”. Into its tentacles, in addition, E*TRADE has more than 11,000 automatic counter network for customers to use.

Feature 3: Rich information consultation content. E*TRADE provides customers with a wealth of information content and research reports, and cooperates with Ernst & Young to provide financial information services. E*TRADE strengthened its financial vertical network service strategy by buying Telebank. In addition to securities information, E*TRADE also provides home loan services, insurance products, retirement planning, taxation and online financial advisory services.

In general, E*TRADE is an outstanding representative of pure online securities brokerage companies. The most important competitive advantage lies in its strong technical development capability and convenient online trading channels. The cost is lower because no physical outlets are established. At the same time, it also attracts customers who are price sensitive and have low service requirements in a discounted manner. E*TRADE only provides pure low-end channel services, all customer transactions are conducted online, with an average commission of about $10 per commission.

6. Internet insurance

The US Internet insurance business mainly includes agency mode and online direct sales mode. The agency model mainly forms a close cooperative relationship with insurance companies to realize online insurance transactions and obtain economies of scale. The advantage is that its large network radiation capability can obtain a large number of potential customers; the online direct sales model is more conducive to directly enhancing the image of the company. Can help insurance companies develop new marketing channels and customer service methods.

Due to its leading position in network technology and superior market economy environment, the United States is still the earliest country to develop Internet insurance, which appeared in the mid-1990s. In the United States, most insurance companies have developed online operations. The most influential are InsWeb,, Quicken, Quickquote, SelectQuote and other websites.

According to statistics, Internet insurance in most developed countries has developed relatively mature. The online transaction volume of some insurance types in the United States has accounted for 30%-50%. In 2010, online insurance premiums for auto insurance and home insurance accounted for 47% and 32. %, South Korea’s online auto insurance sales have accounted for more than 20% of the overall market, Japan’s auto insurance business accounted for 41% of e-commerce channels, online sales channels have become a channel for personal insurance fast sales.

Typical company: InsWeb

Founded in February 1995 in California, InsWeb is one of the world’s largest insurance supermarket websites. It is a successful case of the US Internet insurance agent model.

InsWeb provides consumers with insurance product quotations from multiple insurance companies. Consumers can compare the products of various insurance companies and make purchase decisions. InsWeb initially provided online quotations for auto insurance, and then gradually expanded to include various life insurance products such as life insurance, residential insurance, and health insurance. InsWeb’s commission income from the sale of insurance products is the main operating income.

In 2005, InsWeb established the AgentInsider (internal agent) system to provide insurance agents with more and more convenient opportunities for exhibitions. When a consumer submits personal information and insured intentions, InsWeb will forward it as a marketing lead to the insurance agent registered on the website and charge the agent a fee. Unlike other websites, InsWeb’s registered insurance agents do not need to pay membership fees. InsWeb also provides learning centers for consumers on its website, providing articles on insurance, FAQs and more.

In the second half of 2011, InsWeb was acquired by Bankrate, which in 2012 acquired InsuranceServices, an insurance service website, to integrate with InsWeb’s AgentInsider system, making InsWeb’s services more powerful. In the third quarter of 2011, InsWeb’s revenue reached $12.8 million, up 21% year-on-year.


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