UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                     

For the transition period from                      to                     

Commission file number: 001-38269

FinVolution Group

(Exact name of Registrant as specified in its charter)

Cayman Islands

(Jurisdiction of incorporation or organization)

Building G1, No. 999 Dangui Road

Pudong New District, Shanghai 200120

The People’s Republic of China

(Address of principal executive offices)

Simon Tak Leung Ho, Chief Financial Officer

Phone: +86 21 8030 3200

Email: simon@xinye.com

Building G1, No. 999 Dangui Road

Pudong New District, Shanghai 200120

The People’s Republic of China

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Trading Symbol	Name of each exchange on which registered
American depositary shares (one American depositary share representing five Class A ordinary shares, par value US$0.00001 per share)	FINV	New York Stock Exchange
Class A ordinary shares, par value US$0.00001 per share*		New York Stock Exchange

* Not for trading, but only in connection with the listing on the New York Stock Exchange of American depositary shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Not Applicable

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Not Applicable

(Title of Class)

As of December 31, 2019, there were 1,529,436,904 ordinary shares outstanding, consisting of 943,436,904 Class A ordinary shares and 586,000,000 outstanding Class B ordinary shares, both with a par value of US$0.00001 per share. 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ☐    No  ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
				Emerging growth company	☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ☒	International Financial Reporting Standards as issued		Other  ☐
	by the International Accounting Standards Board	☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ☐    Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes  ☐    No  ☐

TABLE OF CONTENTS

INTRODUCTION		1
FORWARD-LOOKING STATEMENTS		3
PART I		4
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	4
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	4
ITEM 3.	KEY INFORMATION	4
ITEM 4.	INFORMATION ON THE COMPANY	60
ITEM 4A.	UNRESOLVED STAFF COMMENTS	104
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	104
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	125
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	136
ITEM 8.	FINANCIAL INFORMATION	137
ITEM 9.	THE OFFER AND LISTING	138
ITEM 10.	ADDITIONAL INFORMATION	138
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	150
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	150
PART II		153
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	153
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	153
ITEM 15.	CONTROLS AND PROCEDURES	153
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	155
ITEM 16B.	CODE OF ETHICS	155
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	155
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	156
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	156
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	156
ITEM 16G.	CORPORATE GOVERNANCE	156
ITEM 16H.	MINE SAFETY DISCLOSURE	157
PART III		158
ITEM 17.	FINANCIAL STATEMENTS	158
ITEM 18.	FINANCIAL STATEMENTS	158
ITEM 19.	EXHIBITS	158
SIGNATURES		163

i

INTRODUCTION

Unless otherwise indicated or the context otherwise requires in this annual report on Form 20-F:

• “ADSs” refers to our American depositary shares, each of which represents five Class A ordinary shares;

• “average rate of transaction service fees” for a given period is computed by dividing the total amount of transaction service fees we received during the period by the total volume of loans originated on our platform during the same period. For loans funded by individual investors, the transaction service fee is collected from borrowers for our services in matching them with investors and for other services we provide over the loans’ lifecycle. For loans funded by institutional funding partners, the transaction service fee is collected from institutional funding partners and, if applicable, from third-party guarantee companies for our services in borrower introduction and preliminary credit assessment, as well as other services we provide over the loans’ lifecycle;

• “China” or the “PRC” refers to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan;

• “delinquency rate” refers to the balance of the outstanding principal for loans that were 15 to 29, 30 to 59, 60 to 89, 90 to 119, 120 to 149 and 150 to 179 calendar days past due as of a date as a percentage of the total outstanding balance of principal for the loans on our platform as of such date. Loans that are delinquent for 180 days or more are typically considered charged-off and are not included in the delinquency rate calculation;

• “investment transactions” for a given period refers to the total number of investments executed by investors on our platform whether using self-discretionary investing tool or automated investing tools or deployed through our investment programs during such period. An investor’s investment in a loan is counted as one investment transaction;

• number of “unique borrowers” at a certain point in time refers to the cumulative number of borrowers whose loans on our platform had been funded before such point in time;

• number of “unique borrowers” in a given period refers to the total number of borrowers whose loans on our platform were funded during such period;

• “ordinary shares” refers to our Class A and Class B ordinary shares, par value US$0.00001 per share;

• “RMB” and “Renminbi” refer to the legal currency of China;

• “US$,” “U.S. dollars,” “$,” and “dollars” refer to the legal currency of the United States;

• “vintage delinquency rate” refers to (i) the total amount of principal for all the loans in a vintage that become delinquent, less (ii) the total amount of recovered past due principal for all loans in the same vintage, and then divided by (iii) the total amount of initial principal for all loans in such vintage. For purpose of this annual report, loans facilitated during a specified time period are referred to as a vintage. Loans that are delinquent for 180 days or more are included in the calculation of vintage delinquency rate; and

• “We,” “us,” “our company,” “our” and “FinVolution” refer to FinVolution Group, its subsidiaries, variable interest entities and their respective subsidiaries, if any.

1

Our reporting currency is the Renminbi because our business is mainly conducted in China and all of our revenues are denominated in Renminbi. This annual report contains translations of Renminbi amounts into U.S. dollars at specific rates solely for the convenience of the reader. The conversion of Renminbi into U.S. dollars in this annual report is based on the rate certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report were made at RMB6.9618 to US$1.00, the noon buying rate on December 31, 2019 set forth in the H.10 statistical release of the U.S. Federal Reserve Board. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. On April 24, 2020, the noon buying rate set forth in the H.10 statistical release of the Federal Reserve Board was RMB7.0813 to US$1.00.

2

FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. Known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information—D. Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigations Reform Act of 1995.

You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:

• our mission and strategies;

• our future business development, financial condition and results of operations;

• the expected growth of the online consumer finance platform market in China;

• our expectations regarding demand for and market acceptance of our products and services;

• our expectations regarding our relationships with investors and borrowers;

• competition in our industry;

• general economic and business condition in China and elsewhere; and

• relevant government policies and regulations relating to our industry.

These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. You should thoroughly read this annual report and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. In addition, the rapidly changing nature of the online consumer finance industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

3

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

The following selected consolidated statements of comprehensive income/(loss) data and selected consolidated cash flows data for the years ended December 31, 2017, 2018 and 2019, and selected consolidated balance sheets data as of December 31, 2018 and 2019 have been derived from our audited consolidated financial statements included elsewhere in this annual report beginning on page F-1. The following selected consolidated statements of comprehensive income/(loss) data and selected consolidated cash flows data for the year ended December 31, 2016 and selected consolidated balance sheets data as of December 31, 2015, 2016 and 2017 have been derived from our audited consolidated financial statements not included in this annual report. The following selected consolidated cash flows data for the year ended December 31, 2015 are not derived from our audited consolidated financial statements. These cash flows data were restated due to our adoption of ASU 2016-18 on January 1, 2018, which requires us to retrospectively restate the statement of cash flows to include restricted cash and restricted cash equivalents. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. Our historical results do not necessarily indicate results expected for any future periods. You should read this Selected Financial Data section together with our consolidated financial statements and the related notes and “Item 5. Operating and Financial Review and Prospects” below.

The following table presents our selected consolidated statements of comprehensive income/(loss) data for the years ended December 31, 2015, 2016, 2017, 2018 and 2019.

	Year Ended December 31,
	2015			2016			2017			2018(1)			2019
	RMB			RMB			RMB			RMB			RMB			US$
	(in thousands, except for share, per share and per ADS data)
Selected Consolidated Statements of Comprehensive Income/(Loss) Data:
Operating revenues:
Loan facilitation service fees		164,279			911,448			2,843,287			2,919,234			3,310,875			475,577
Post-facilitation service fees		8,011			126,823			668,819			922,797			1,200,373			172,423
Net interest income(2)		4,249			41,789			31,377			256,108			1,106,669			158,963
Other revenue		25,062			170,403			491,400			376,915			344,840			49,533
Changes in expected discretionary payment to IRF investors		—			—			(107,660	)		68,619			—			—
Net revenues		201,601			1,250,463			3,927,223			4,543,673			5,962,757			856,496
Operating expenses:
Origination and servicing expenses		(99,383	)		(349,852	)		(890,160	)		(875,905	)		(1,164,716	)		(167,301	)
Origination and servicing expenses-related party		—			(38,297	)		(84,362	)		(109,666	)		(43,494	)		(6,248	)
Sales and marketing expenses		(125,439	)		(352,952	)		(788,291	)		(710,754	)		(720,333	)		(103,469	)
General and administrative expenses		(101,805	)		(123,160	)		(423,795	)		(383,388	)		(435,816	)		(62,601	)
Research and development expenses		(14,137	)		(114,648	)		(164,869	)		(317,965	)		(390,585	)		(56,104	)
Provision for loan receivable(2)		(5,912	)		(34,705	)		(46,586	)		(192,749	)		(299,504	)		(43,021	)
Provision for accounts receivable		—			—			—			(106,652	)		(261,882	)		(37,617	)
Total operating expenses		(346,676	)		(1,013,614	)		(2,398,063	)		(2,697,079	)		(3,316,330	)		(476,361	)
Other income/(expenses)(3)		77,299			312,908			(171,542	)		774,063			210,053			30,173
Profit before income tax expenses		(67,776	)		549,757			1,357,618			2,620,657			2,856,480			410,308
Income tax expense		(4,364	)		(48,267	)		(274,711	)		(151,206	)		(481,962	)		(69,230	)
Net profit/(loss)		(72,140	)		501,490			1,082,907			2,469,451			2,374,518			341,078
Less: Net profit/(loss) attributable to non-controlling interest shareholders		—			—			(76	)		377			1,668			240
Accretion on Series A, B and C convertible redeemable preferred shares to redemption value		(108,792	)		(562,022	)		(3,073,471	)		—			—			—

4

Net profit/(loss) attributable to FinVolution Group’s ordinary shareholders	(180,932	)	(60,532	)	(1,990,488	)	2,469,074	2,372,850	340,838
Total comprehensive income/(loss) attributable to FinVolution Group	(97,137	)	440,992		1,182,917		2,512,367	2,384,960	342,577
Weighted average number of ordinary shares used in computing net income/(loss) per share(4)
Basic	665,000,000		665,000,000		779,804,270		1,498,780,165	1,525,814,189	1,525,814,189
Diluted	665,000,000		665,000,000		779,804,270		1,599,592,231	1,552,423,060	1,552,423,060
Net income/(loss) per share attributable to ordinary shareholders
Net income/(loss) per share – Basic	(0.2721	)	(0.091	)	(2.5525	)	1.6474	1.5551	0.2234
Net income/(loss) per share – Diluted	(0.2721	)	(0.091	)	(2.5525	)	1.5436	1.5285	0.2196
Net income/(loss) per ADS(5)
Net income/(loss) per ADS – Basic	(1.3605	)	(0.4551	)	(12.7627	)	8.2369	7.7757	1.1169
Net income/(loss) per ADS – Diluted	(1.3605	)	(0.4551	)	(12.7627	)	7.7178	7.6424	1.0978

(1) On January 1, 2018, we adopted new revenue guidance ASC Topic 606, “Revenue from Contracts with Customers,” using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting method under Topic 605.

(2) We historically presented interest income, interest expenses and provision for loan receivables within the financial statement line item “net interest income (expense) and loan provision losses.” In 2019, we reclassified provision for loan receivables amounting RMB299.5 million from “net interest income (expense) and loan provision losses” in operating revenue to “provision for loan receivables” in operating expenses. The amount of provision for loan receivables that have been reclassified to conform to the current period financial statement presentation were RMB5.9 million, RMB34.7 million, RMB46.6 million and RMB192.7 million for the year ended December 31, 2015, 2016, 2017 and 2018, respectively.

(3) The following table sets forth the breakdown of our other income/(expenses):

	Year Ended December 31,
	2015			2016		2017			2018			2019
	RMB			RMB		RMB			RMB			RMB			US$
	(in thousands)
Other income/(expenses)
Gain from quality assurance		42,358			99,961		5,885			510,894			98,405			14,135
Realized gain/(loss) from financial guarantee derivatives		19,549			31,999		169,103			(157,244	)		31,444			4,517
Fair value change of financial guarantee derivatives		15,757			146,653		(383,061	)		272,057			(56,287	)		(8,085	)
Gain from disposal of subsidiary		—			20,611		—			—			—			—
Other income/(expenses), net		(365	)		13,684		36,531			148,356			136,491			19,606
Total other income/(expenses)		77,299			312,908		(171,542	)		774,063			210,053			30,173

(4) On October 20, 2017, we effected a 100-for-1 share split, such that our authorized share capital of US$50,000 was divided into 5,000,000,000 shares with a par value of US$0.00001 each. For the purpose of calculating net loss per share, such share split has been retroactively reflected for all periods presented herein.

(5) Each ADS represents five Class A ordinary shares. On October 20, 2017, we effected a 100-for-1 share split, such that our authorized share capital of US$50,000 was divided into 5,000,000,000 shares with a par value of US$0.00001 each. For the purpose of calculating loss per ADS, such share split has been retroactively reflected for all periods presented herein.

The following table presents our selected consolidated balance sheet data as of December 31, 2015, 2016, 2017, 2018 and 2019.

	As of December 31,
	2015		2016		2017		2018		2019
	RMB		RMB		RMB		RMB		RMB		US$
	(in thousands)
Selected Consolidated Balance Sheets Data:
Cash and cash equivalents		92,495		404,678		1,891,131		1,616,164		2,324,542		333,900
Restricted cash(1)		269,761		802,887		2,392,573		3,677,557		3,686,203		529,490
Short-term investments		34,468		260,000		1,958,910		1,694,660		114,560		16,456
Quality assurance receivable		115,484		286,812		1,152,769		2,064,366		3,649,642		524,238
Investments		—		2,428		12,234		167,501		952,833		136,866
Contract assets		—		—		—		112,103		20,555		2,952
Financial guarantee derivative assets		20,638		167,291		—		56,287		—		—

5

Total assets	736,920		2,147,291		8,603,663	13,142,467	18,304,456	2,629,268
Payable to platform customers	176,165		421,659		1,113,966	905,034	684,630	98,341
Quality assurance payable	125,651		473,704		2,062,844	3,819,379	4,776,153	686,051
Deferred revenue	13,680		162,896		265,094	—	—	—
Provision for payment to investor reserve fund investor	—		—		107,660	—	—	—
Contract liabilities	—		—		—	165,469	55,728	8,005
Financial guarantee derivative liabilities	—		—		215,770	—	—	—
Total liabilities	468,543		1,375,069		4,921,475	7,156,729	10,292,976	1,478,494
Total mezzanine equity	585,770		1,210,645		—	—	—	—
Total shareholders’ equity/(deficit)	(317,393	)	(438,423	)	3,682,188	5,985,738	8,011,480	1,150,774

(1) The following table sets forth the breakdown of restricted cash:

	As of December 31,
	2015		2016		2017		2018		2019
	RMB		RMB		RMB		RMB		RMB		US$
	(in thousands)
Restricted cash:
Quality assurance commitment and quality assurance fund		52,863		329,549		1,058,617		2,414,449		1,473,749		211,691
Investor reserve funds		19,680		51,679		175,215		17,971		41,958		6,027
Cash received from investors and borrowers		176,165		421,659		1,113,966		905,034		684,630		98,341
Designated accounts for security deposits		—		—		—		—		390,000		56,020
Cash received via consolidated trust that has not yet been distributed		—		—		44,775		303,667		799,646		114,862
Collateral for short-term borrowings		21,053		—		—		26,000		251,853		36,176
Escrow accounts		—		—		—		10,436		44,367		6,373
Total restricted cash		269,761		802,887		2,392,573		3,677,557		3,686,203		529,490

On January 1, 2018, we adopted ASU 2016-18, which requires us to retrospectively restate the statement of cash flows to include restricted cash and restricted cash equivalents. The following table presents our selected restated consolidated cash flow data for the years ended December 31, 2015, 2016, 2017, 2018 and 2019.

	Year Ended December 31,
	2015			2016			2017			2018			2019
	RMB			RMB			RMB			RMB			RMB			US$
	(in thousands)
Summary Consolidated Cash Flows Data:
Net cash provided by/(used in) operating activities		79,163			1,088,227			3,409,451			1,884,956			(215,522	)		(30,958	)
Net cash used in investing activities		(132,242	)		(684,112	)		(2,450,800	)		(1,447,013	)		(828,219	)		(118,966	)
Net cash provided by financing activities		338,045			438,701			2,132,933			530,097			1,749,512			251,301
Effect of exchange rate changes on cash, cash equivalents and restricted cash		—			2,493			(15,445	)		41,977			11,253			1,618
Net increase in cash, cash equivalents and restricted cash		284,966			845,309			3,076,139			1,010,017			717,024			102,995
Cash, cash equivalents and restricted cash at beginning of year		77,290			362,256			1,207,565			4,283,704			5,293,721			760,395
Cash, cash equivalents and restricted cash at end of year		362,256			1,207,565			4,283,704			5,293,721			6,010,745			863,390

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

6

D. Risk Factors

Risks Related to Our Business

We operate in China’s online consumer finance platform market, an emerging and evolving industry, which makes it difficult to evaluate our future prospects.

China’s online consumer finance industry is new and may not develop as expected. The regulatory framework for this industry is also evolving and may remain uncertain for the foreseeable future. China’s online consumer finance industry in general remains at a rather preliminary development stage and may not develop at the anticipated growth rate. It is possible that the PRC laws and regulations may change in ways that do not favor our development. If that happens, there may not be adequate loans facilitated on our platform and our current business model may be negatively affected. As a new industry, there are very few established players whose business models we can follow or build upon. Potential borrowers, investors and institutional funding partners may not be familiar with this new industry and may have difficulty distinguishing our services from those of our competitors. Attracting and retaining borrowers, investors and institutional funding partners is critical to increasing the volume of loans facilitated through our platform. The emerging and evolving online consumer finance market makes it difficult to effectively assess our future prospects. In addition, our business has grown substantially in recent years, but our past growth rates may not be indicative of our future growth.

You should consider our business and prospects in light of the risks and challenges we encounter or may encounter in this developing and rapidly evolving industry. These risks and challenges include our ability to, among other things:

• navigate an evolving regulatory environment;

• expand the base of borrowers, investors and institutional funding partners served on our platform;

• maintain our credit standards;

• enhance our risk management capabilities;

• improve our operational efficiency;

• continue to scale our technology infrastructure to support the growth of our platform and higher transaction volume;

• broaden our loan product offerings;

• operate without being adversely affected by the negative publicity about the industry in general and our company in particular;

• maintain the security of our platform and the confidentiality of the information provided and utilized across our platform;

• cultivate a vibrant consumer finance ecosystem;

• attract, retain and motivate talented employees; and

• defend ourselves in litigation, and against regulatory, intellectual property, privacy or other claims.

If the market for our platform does not develop as we expect, if we fail to educate potential borrowers, investors and institutional funding partners about the value of our platform and services, or if we fail to address the needs of our target customers, our reputation, business and results of operations will be materially and adversely affected.

We are in the process of transforming our business model and this transformation may not be successful ultimately.

We are in the process of transforming our business model by expanding funding for loan facilitations on our platform from institutional funding partners and at the same time reducing funding from individual investors. We have ceased facilitating new loans with funding from individual investors on our platform since October 2019. As of March 31, 2020, the outstanding balance of loans invested by individual investors on our platform was RMB2.0 billion (US$0.3 billion).

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In connection with this transformation, our business operations are in the process of considerable changes, such as planning to offer new products and services, adjusting our business process and model, hiring new employees and building up new departments, and collaborating with new business partners. We may experience a loss of continuity, loss of accumulated knowledge or loss of efficiency during this transitional period. Additionally, it is uncertain whether these efforts will eventually bring us benefits as we anticipated. If we fail to achieve some or all of the expected benefits of this business transformation, our competitive position, business, financial condition and results of operations could be materially and adversely affected.

Even if our business model transformation is implemented successfully as we planned, the actual costs incurred in this process may be substantially higher than we anticipated. There might also be other issues and negative consequences arising from our business transformation such as loss of borrower base, internal control issues, changes in employee structure as well as other unexpected consequences, any of which may have a material adverse effect on our competitive position, business, financial condition and results of operations.

We started our business as an online lending information intermediary, and the laws and regulations governing online lending information intermediary industry in China are developing and evolving and subject to changes. If our business practices are deemed to violate any existing and future applicable laws, regulations or requirements of local regulatory authorities, our business, financial condition and results of operations would be materially and adversely affected.

Due to the relatively short history of the online lending information intermediaries in China, the PRC government has yet to establish a comprehensive regulatory framework governing such industry. Before any industry-specific regulations were introduced in mid-2015, the PRC government relied on general and basic laws and regulations for governing the online lending information intermediaries, including the PRC Contract Law, the General Principles of the PRC Civil Law, and related judicial interpretations promulgated by the Supreme People’s Court. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services.”

In July 2015, the People’s Bank of China, or the PBOC, together with nine other PRC regulatory agencies jointly issued a series of policy measures applicable to the online consumer finance industry titled the Guidelines on Promoting the Healthy Development of Online Finance Industry, or the Guidelines. The Guidelines formally introduced for the first time the regulatory framework and basic principles for administering online lending information services in China. Based on the core principles of the Guidelines, in August 2016, the China Banking Regulatory Commission, or the CBRC, together with three other PRC regulatory agencies jointly issued the Interim Measures on Administration of Business Activities of Online Lending Information Intermediaries, or the Interim Measures. The Interim Measures, among other things, introduced a record-filing and licensing regime for the online lending information intermediaries and provided the general obligations and certain prohibited activities of the online lending information intermediaries. In February 2017 and August 2017, the CBRC issued the Guidelines on Online Lending Funds Custodian Business, or the Custodian Guidelines, and the Guidelines on Information Disclosure of the Business Activities of Online Lending Information Intermediaries, or the Disclosure Guidelines, respectively. The Custodian Guidelines further clarified the requirement of setting up custody accounts with commercial banks for the funds of investors and borrowers held by online consumer finance platforms, while the Disclosure Guidelines further specified the disclosure requirements for online lending information service providers. Both of the Custodian Guidelines and the Disclosure Guidelines provided a rectification period for online consumer finance platforms to comply with such requirement. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services—Regulations on online lending information services.”

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Pursuant to the Interim Measures, local financial regulatory authorities may conduct onsite inspections or inquiries from time to time and instruct us to rectify our business operations that are deemed not to be in compliance with the Guidelines or the Interim Measures. For instance, following the onsite inspection in December 2016 of Shanghai PPDai Financial Information Service Co., Ltd., or Shanghai PPDai, one of our consolidated subsidiaries, in June 2017, the financial service office of Shanghai Pudong District and two other local regulatory authorities (collectively, the “Shanghai financial regulatory authorities”) required Shanghai PPDai to rectify certain of its practices, including with respect to investor reserve funds, and in August 2017, further required Shanghai PPDai to provide certain undertakings with respect to its “business scale.” In response to the authorities’ requests, Shanghai PPDai has undertaken, among others:

(i) to ensure that its “business scale” (which we understand, based on our communication with the authorities, refers to the outstanding balance of loans invested by individual investors facilitated by our Shanghai operations) does not exceed the total outstanding balance of loans invested through our platform as of June 30, 2017 (which amounted to RMB20.6 billion (US$3.0 billion)) until March 31, 2018 or as otherwise specified by relevant regulatory authorities in the future. As of March 31, 2020, the total outstanding balance of loans invested by individual investors facilitated by our Shanghai operations did not exceed the upper limit imposed by the authorities; and

(ii) to change the Chinese name of our investor reserve funds by January 2018, in order to avoid giving the false impression that we were providing guarantees to investors of the investment programs protected by investor reserve funds. On January 1, 2018, we discontinued our investor reserve funds. Investors investing in our investment programs were no longer required to set aside a certain percentage of their investment amount into the investor reserve funds. The remaining balance of the investor reserve funds collected before January 1, 2018 was used to protect investors who invested in the corresponding investment programs covered by the fund.

However, we cannot assure you that these rectifications will satisfy the Shanghai financial regulatory authorities’ requirements fully. If Shanghai PPDai is required to make further rectifications, our business and financial conditions would be materially and adversely affected.

In addition, the Interim Measures introduced a record-filing and licensing regime, which requires online lending information intermediaries to register with the local financial regulatory authority, update their industrial and commercial registration with the local commercial registration authority to include “online lending information intermediary” in their business scopes, and obtain telecommunication business license from the relevant telecommunication regulatory authority. On December 8, 2017, the National Online Lending Information Rectification Office issued the Notice on the Rectification and Inspection Acceptance of Risk of Online Lending Intermediaries, or the Circular 57, providing further clarification on several matters in connection with the rectification and record-filing of online lending information intermediaries, including, among other things:

• Requirements relating to risk reserve funds. The online lending information intermediaries shall discontinue setting aside additional funds as risk reserve funds or originating new risk reserve funds. In addition, the existing balance of risk reserve funds shall be gradually reduced.

• Requirements to qualify for record-filing. The Circular 57 sets forth certain requirements that online lending intermediaries have to comply with before they can be qualified for the record-filing, including: (i) online lending intermediaries shall not engage in the “thirteen prohibited actions” or violate the lending amount limit for a single investor set out in the Interim Measures after August 24, 2016, the date on which the Interim Measures was promulgated, and record-filing shall not be made before relevant businesses that are not in compliance with relevant regulations are gradually eliminated; (ii) online lending intermediaries that engage in businesses of down payment loan in purchasing real estate properties, student loan or “cash loan” are required to suspend the new loan origination, gradually eliminate the outstanding balance of the abovementioned loans, and set timelines for completing the rectification in accordance with requirements of the CBRC Circular 26 and the Circular 141; and (iii) online lending intermediaries are required to set up custody accounts with qualified banks that have passed certain testing and evaluation procedures run by the National Online Lending Rectification Office to hold customer funds. For the online lending intermediaries that are unable to accomplish the rectification and record-filing but are continuing to participate in the online lending business, they should be subject to administrative sanctions imposed by relevant authorities, including but not limited to revoking their telecommunicating business operation license, shutting down their business websites and requesting financial institutions not to provide any financial services to such online lending information intermediaries.

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• Requirements relating to the timing of record-filing. The local governmental authorities shall conduct and complete acceptance inspection of the rectification with the following timetable: (i) completion of record-filing for major online lending information intermediaries by the end of April 2018; (ii) with respect to online lending information intermediaries with substantial outstanding balance of those loans prohibited under the relevant laws and regulations and timely reduction of those balance is difficult, the relevant business and outstanding balance shall be disposed and/or carved out, and record-filing shall be completed by the end of May 2018; (iii) with respect to those online lending information intermediaries with complex and extraordinary circumstances and substantial difficulties exist to complete rectification, the “relevant work” shall be completed by the end of June 2018. In August 2018, the National Online Lending Rectification Office issued the Notice on Launching Compliance Inspection on Online Lending Information Intermediaries, or the Inspection Notice, which requires that online lending information intermediaries, internet finance associations and local online lending rectification offices conduct compliance inspections based on a checklist of 108 compliance criteria, or the Checklist, and that such inspections shall be completed by the end of December 2018. After the compliance inspection, online lending information intermediaries that comply with applicable rules and regulations are allowed to integrate their business operation systems into the industry-wide information disclosure systems and product registration systems. Upon completion of such integration, the online lending information intermediaries will be able to submit filing applications for record-filings pursuant to detailed procedures to be issued by the competent regulatory authorities.

As of the date of this annual report, detailed record-filing procedures have not been issued yet and it remains unclear when such detailed procedures for the record-filing applications will be issued. We submitted a self-inspection report as requested by the Inspection Notice and the Checklist to Association of Shanghai Internet Financial Industry, or the ASIFI, National Internet Finance Association of China, or the NIFA, and Shanghai Online Lending Rectification Office. As of the date of this annual report, we have received the rectification advice from ASIFI and some initial documentation rectification requirements from NIFA, but the feedback from Shanghai Online Lending Rectification Office is still pending. We are working closely with relevant authorities for inspection and rectification.

In December 2018, the National Internet Finance Rectification Office and the National Online Lending Rectification Office jointly issued the Guidance on the Classification and Disposal of Risks of Online Lending Information Intermediaries and Risk Prevention, or Circular 175. Circular 175 refers to normal intermediaries as large-scale online lending information intermediaries that are strictly in compliance with relevant laws and regulations and have not demonstrated any high-risk characteristics. Circular 175 reiterates relevant regulatory requirements by providing that normal intermediaries should strictly control and manage the business scale and the number of investors. Circular 175 further tightens the regulation of the industry by requiring institutions other than normal intermediaries, including shell intermediaries with no substantive operations, small-scale intermediaries, intermediaries with high risks, and intermediaries that are unable to repay investors or otherwise unable to operate their businesses, to exit the online lending information intermediary industry. We have been in the process of business model transformation and have been transitioning our investor base from individuals to institutional funding partners. As of March 31, 2020, the outstanding balance of loans invested by individual investors on our platform was RMB2.0 billion (US$0.3 billion). Before we complete our business transformation, however, our business may be materially and adversely affected if our rectification measures do not satisfy the regulatory requirements.

In 2019, the regulatory environment of the online lending information intermediary industry continued to be stringent. We noticed in November 2019 that several internet media reported that the National Internet Finance Rectification Office and the National Online Lending Rectification Office jointly issued the Guidance on Pilot Transforming Online Lending Information Intermediaries into Micro Lending Companies, or Pilot Transforming Guidance, pursuant to which the qualified online lending information intermediaries may apply to be transformed into micro-lending companies, with operations nationwide or in a single province only. In order to be qualified for being transformed into a micro-lending company with nationwide operations, an online lending information intermediary must, among other requirements, (i) have a registered capital of no less than RMB1.0 billion, (ii) have no material violation in the existing and unsettled business, (iii) have good financial conditions, (iv) have a custodian bank system that has handled all transfers of funds between the investors and the borrowers in the past one year, (v) have no material administrative or criminal penalty imposed on it, its controlling shareholders or its principal executives in the past two years, and (vi) have good financial technology capabilities. Furthermore, the companies that have had ceased the online lending information intermediary business are unqualified for being transformed into micro-lending companies. We are unable to verify the authenticity and accuracy of those media reports. If those media reports are authentic and accurate in terms of the content of the Pilot Transforming Guidance and we decide to transform from an online lending information intermediary into a micro-lending company, Shanghai PPDai will have to make adjustments its business operations to comply with the Pilot Transforming Guidance. In addition, even if we were to make adjustments our business operations to comply with the Pilot Transforming Guidance, we could not rule out the possibility that the regulatory authorities would deny our application and Shanghai PPDai could not be transformed into a micro-lending company as expected.

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In addition, on December 28, 2019, the Standing Committee of the National People’s Congress of the PRC, or the SCNPC, approved a resolution to submit the draft Civil Code of the PRC to the third annual session of the 13th National People’s Congress, or the NPC, for review and approval. If the draft Civil Code of the PRC is approved by the NPC, upon the effectiveness of the Civil Code of the PRC, the PRC Contract Law, the General Provisions of the PRC Civil Law, and the General Principles of the PRC Civil Law will be abolished and replaced, while their provisions will be generally incorporated into the Civil Code of the PRC with certain changes and supplements. The third annual session of the 13th NPC was planned to be held on March 5, 2020, which has been postponed to May 22, 2020 due to the outbreak of COVID-19 in China. It remains unclear with respect to the final version of the Civil Code of the PRC, the timetable for enactment, and the relevant interpretations and implementations. Moreover, it remains unclear how the provisions of the Civil Code of the PRC, if enacted as proposed, will apply to our business operations. For example, pursuant to the draft of the Civil Code of the PRC published by the SCNPC on December 28, 2019, usurious loans are explicitly banned, but a clear definition or interpretation of “usurious loans” is not provided. Therefore, our business will be subject to regulatory uncertainties if the Civil Code of the PRC is enacted as proposed.

The laws, regulations, rules and governmental policies are expected to continue to evolve in our industry. We are unable to predict with certainty the impact, if any, that future legislation, judicial interpretations or regulations relating to the online consumer finance industry will have on our business, financial condition and results of operations. To the extent that we are not able to fully comply with any new laws or regulations when they are promulgated, our business, financial condition and results of operations may be materially and adversely affected.

If our practice is deemed to violate any PRC laws and regulations, our business, financial condition and results of operations would be materially and adversely affected.

According to the Guidelines and the Interim Measures, intermediaries that provide online lending information services shall not engage in certain activities, including (i) fund raising for the intermediaries themselves, (ii) holding investors’ fund or setting up capital pools with investors’ fund, (iii) providing security or guarantee to investors as to the principals and returns of the investment, (iv) issuing or selling any bank’s wealth management products, assets management products of securities companies, fund products, insurance products, trust products or other financial products, (v) mismatch between investor’s expected timing of exit and the maturity date, (vi) securitization, (vii) promoting its financing products on physical premises other than through the permitted electronic channels, such as telephones, mobile phones and internet, (viii) providing loans with its own capital, except as otherwise permitted by laws and regulations; and (ix) equity crowd-funding. In addition, the Interim Measures stipulates the maximum amount that a borrower may borrow through online consumer finance platforms. The Interim Measures also requires the intermediaries that provide online lending information services to strengthen their risk management, enhance screening and verifying efforts on the borrowers’ and investors’ information, and to set up custody accounts with qualified banks to hold customer funds, and to disclose the basic information to the investors and borrowers.

Furthermore, the Circular 57 requires online lending information intermediaries to discontinue setting aside additional funds as risk reserve funds or originating new risk reserve funds and the existing balance of risk reserve funds shall be gradually reduced. In addition to the Circular 57, the National Internet Finance Rectification Office and the National Online Lending Rectification Office jointly issued the Notice on Regulating and Rectifying “Cash Loan” Business, or the Circular 141, in December 2017, outlining general requirements on the “cash loan” business conducted by, among others, online lending information intermediaries. The Circular 141 specifies the features of “cash loans” as not relying on consumption scenarios, with no specified use of loan proceeds, unsecured, and no qualification requirement on customers, among others. The Circular 141 also sets forth several general requirements with respect to “cash loan” business, including but without limitation: (i) the aggregated borrowing costs of borrowers charged by institutions in the forms of interest and various fees should be annualized and subject to the limit on interest rate of private lending set forth in the Private Lending Judicial Interpretations issued by the Supreme People’s Court; (ii) all relevant institutions shall follow the “know-your-customer” principle and prudentially assess and determine the borrower’s eligibility, credit limit and cooling-off period; (iii) loans to any borrower without income sources are prohibited; (iv) all relevant institutions shall enhance the internal risk control and prudentially use the “data-driven” risk management model; (v) online lending information intermediaries are prohibited from facilitating any loans to students or other persons without repayment source or repayment capacity, or loans with no designated use of proceeds; (vi) online lending information intermediaries are not permitted to deduct interest, handling fee, management fee or deposit from the principal of loans provided to the borrowers in advance; and (vii) in the case where a financial institution participates in the “cash loan” business, any third parties are not allowed to charge borrowers any interests or fees. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services.”

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On March 28, 2018, the National Internet Finance Rectification Office issued the Notice on Strengthening Rectification and Carrying Out Inspection Acceptance Work of Online Asset Management Operations, or Circular 29, which provided that without the license or approval from the PRC financial regulatory authorities, no entity may issue or sell asset management products through the internet. The definition of “asset management product” is not provided in Circular 29. The application and interpretation of Circular 29 are ambiguous and may be interpreted and applied inconsistently between different government authorities. Any entities that violate Circular 29 may be deemed to be conducting illegal financial business operation and subject to administrative sanctions such as revoking telecommunication license, revoking business license, shutting down the business website, removing the mobile application from application stores and application distributing channels, requesting financial institutions not to provide any financial services to such entity, and even criminal liability. On April 27, 2018 the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange issued the Guiding Opinions on Regulating the Asset Management Business of Financial Institutions, or the New Asset Management Rule, which provides, among others, that (i) the “asset management products” includes, among others, the non-guaranteed bank wealth management products denominated in RMB or foreign currency, trust products, asset management products issued by security companies and their subsidiaries, fund management companies and their subsidiaries, futures companies and their subsidiaries, insurance asset management institutions, financial asset investment companies; (ii) non-financial institutions and individuals are not allowed to sell the asset management products as a role of an agent without the approval of the financial regulatory authorities; and (iii) “sell as a role of an agent” means recommending and selling the asset management products lawfully issued by the third-party institutions to the investors within its own sales channel. The non-financial institutions in violation of the New Asset Management Rules to publicly advertise the asset management products through the internet may be deemed as illegal fundraising, illegal securities offering, or illegal absorbing public deposits, and subject to penalties according to the laws and regulations, including criminal liabilities.

In the operation of our consumer finance platform, borrowers on our platform are required to specify their uses of loan proceeds. To ensure a full compliance with existing laws, regulations, rules and governmental policies relating to the online consumer finance industry, we have implemented various policies and procedures to conduct our business and operations. For instance,

• we entered into a custody account arrangement with China Merchants Bank, whereby funds of borrowers and individual investors were deposited into and settled by custody accounts under its management. The custody account arrangement expired in March 2020. We will not pursue new custody account arrangements with other commercial banks since we have ceased to accept new investments from individual investors from October 2019 and are winding down investments from individual investors on our platform. The funds in the custody accounts of China Merchants Bank have been migrated to a third-party payment system managed by a third-party payment company. This third-party payment company, as opposed to a custodian bank, is currently helping us handle repayment and settlement between borrowers and individual investors for loans historically facilitated by our online lending information intermediary, which may be deemed to be a violation of the requirement that online lending information intermediaries shall set up custody accounts with a qualified bank for the funds of investors and borrowers under the Interim Measures and subject us to administrative sanctions, including without limitation, fines, warning letter, rectification order, public notice of criticism, filing the non-compliance conducts with the public credit record system, and other penalties according to the laws and regulations. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services”;

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• the PRC Contract Law prohibits the deduction of interest from a loan principal in advance. Furthermore, Circular 141 also provides that online lending information intermediaries are prohibited from deducting interest, handling fee, management fee or deposit from the loan extended to borrowers in advance. With respect to our online lending information intermediary business, we previously charged transaction service fees and quality assurance fund contributions upfront but ceased this practice in early December 2017. Instead, all interests paid to investors and fees from borrowers have been collected by installments since then along with borrowers’ loan repayment. After we completely phase out the upfront transaction service fee collection model, the principal amount of each successfully matched loan will be released to the borrower in full;

• in response to the new requirements set forth in the Circular 57, we stopped setting aside additional funds as our investor reserve funds on January 1, 2018. The remaining balance of the investor reserve funds collected before January 1, 2018 was used to protect investors who invested in the corresponding investment programs covered by the fund. As of December 31, 2019, the outstanding balance of investments covered by the investor reserve funds was nil;

• to further comply with evolving online lending regulatory requirements, we launched a new quality assurance program in partnership with China United SME Guarantee Corporation, or Sino Guarantee, a Chinese financial services company that provides credit-enhancement services for financial products and risk-sharing services to small and medium enterprises, on February 9, 2018. The quality assurance fund for eligible loans facilitated before February 9, 2018 will continue to be managed by us to protect investors who have invested in the loans covered by the quality assurance fund. As of December 31, 2019, the outstanding balance of investments covered by Sino Guarantee was RMB4.7 billion (US$0.7 billion). We have ceased facilitating new loans with funding from the individual investors on our platform since October 2019;

• to fully comply with the aggregated borrowing cost cap requirement specified by the Circular 141, we have made certain adjustments to some of our loan products to meet this cap requirement. We ceased to offer new handy cash loan products upon the promulgation of Circular 141 and adjusted the fee rate of standard loan products. We believe after making the adjustments on December 14, 2017, the annualized aggregated borrowing cost of all of the products on our platform have been fully complied with this aggregated borrowing cost cap requirement of 36%;

• in the past, our investment programs allocated committed funds from multiple investors among multiple approved borrowers, which went beyond the simple one-to-one matching between investors and borrowers and could be viewed as creating mismatch between an investor’s expected timing of exit and the maturity date, selling wealth management products, holding investors’ funds or forming a capital pool inadvertently. The PRC regulatory authorities have yet to clarify what activity is considered to form capital pools prohibited by the Interim Measures. Given (a) the customer funds were deposited in the custody accounts we opened at China Merchants Bank pursuant to the Custodian Guidelines to ensure the separation of funds of our users from funds of ours; and (b) the investors of our investment programs are able to trace their investment to each of the underlying loans of such investment programs, we believe our investment programs were not a form of capital pool prohibited by the Interim Measures. However, to further embrace the government regulations, we upgraded the investment programs in March 2018 to strictly ensure the one-to-one matching between investors and borrowers and eliminate the possibility of mismatch and capital pool.

• for the loan portfolios funded by our institutional funding partners, such as commercial banks, we discontinued to charge any fees from the borrowers directly. Instead, we started to collect fees mainly from our institutional funding partners and, if applicable, from third-party guarantee companies for our services; and

• we require the borrowers to select their loan applications one of the specified permissible uses of loan proceeds, such as consumer finance, travelling, medical expenses, house improvements.

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However, due to the lack of detailed implementation rules on certain key requirements of the Interim Measures and different interpretation of the Interim Measures by the local authorities, we cannot be certain that our past and existing practices would not be deemed to violate any laws, rules and regulations that are applicable to our business. For instance,

• the past practice of our entitlement to the surplus of the quality assurance fund and investor reserve funds might be regarded by the PRC regulatory authorities as self-financing through our platform in a direct or a disguised form;

• due to underdevelopment of an industry-wide information sharing arrangement, we cannot assure you that the aggregate amount borrowed by any borrower through our platform and other online consumer finance platforms does not exceed the borrowing limit set out by the Interim Measures;

• our calculation of the aggregate borrowing cost of the loans on our platform might be challenged by relevant government authorities and be deemed to be incompliant with relevant rules and regulations;

• we display financial products provided by commercial banks and securities fund selling companies on our mobile application and WeChat official account. By one click, individual investors can access the selling webpage of the banks and securities fund selling companies. As we only provide a channel for our users to purchase third-party financial products and we are not directly involved in the sales of those financial products, we do not believe that we are engaged in selling bank wealth management products or fund products on a online lending information platform, which is explicitly prohibited by the Interim Measures, or selling asset management products without license or approval, which is explicitly prohibited by Circular 29 and the New Asset Management Rules. However, we cannot assure you that relevant regulatory authorities will take the same view. If we are regarded as selling bank wealth management products or fund products on our online lending information platform or selling asset management products without license nor approval, we will be subject to relevant administrative penalties. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services—Regulations on online lending information services” for more details; and

• our cooperation with institutional funding partners through one of our variable interest entities and its subsidiaries, Shanghai Zihe and Shanghai Erxu, has exposed us to and may continue to expose us to additional regulatory uncertainties. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Our cooperation with institutional funding partners may expose us to regulatory uncertainties and we may be required to obtain additional government approval or license due to our cooperation with institutional funding partners” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Regulatory restrictions on institutional funding partners’ acceptance of credit enhancement may adversely affect our business and access to funding.”

Due to the lack of interpretation and implementation rules and the fact that the laws and regulations are rapidly evolving, even if we have implemented above measures, we cannot assure you that we will be in full compliance with existing and future laws and regulations, nor can we assure you that we would not be required by regulatory authorities to make further rectifications to our business in the future. As of the date of this annual report, we have not been subject to any material fines or other penalties under any PRC laws or regulations, including those governing the online consumer finance industry in China. If our practice is deemed to violate any laws, regulations and rules, we may face, among others, regulatory warning, correction order, condemnation, fines and criminal liability. If such situations occur, our business, financial condition, results of operations and prospects would be materially and adversely affected.

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Our cooperation with institutional funding partners may expose us to regulatory uncertainties and we may be required to obtain additional government approval or license due to our cooperation with institutional funding partners.

Due to the lack of a comprehensive and effective regulatory framework and clear and unambiguous application and interpretation of relevant laws and regulations, our cooperation with institutional funding partners has exposed us to regulatory uncertainties. We carry out our cooperation with institutional funding partners through Shanghai Zihe and its wholly-owned subsidiary, Shanghai Erxu. Shanghai Zihe and Shanghai Erxu primarily provide services to our institutional funding partners, such as borrower referral and preliminary credit assessment, and facilitate their participation in our online lending business. These entities are not engaged in operating online lending information intermediary (or online peer-to-peer lending) services. We do not view Shanghai Zihe or Shanghai Erxu as an “online lending information intermediary” as defined under the Interim Measures. However, we cannot assure you that regulatory authorities would take the same view and do not require Shanghai Zihe or its subsidiary to comply with various regulatory requirements on online lending information intermediaries under Circular 141. Even if regulatory authorities take the same view with us, there is no assurance that they will not expand the application of the Circular 141 and regulate Shanghai Zihe or its subsidiary as an online lending information intermediary. If Shanghai Zihe or its subsidiary is deemed to be an online lending information intermediary by relevant regulatory authorities or is required to comply with Interim Measures, we may have to register Shanghai Zihe or its subsidiary with local financial regulatory authorities and change our current business practices to comply with relevant regulatory requirements as an online lending information intermediary.

In addition, the current laws and regulations do not explicitly require any regulatory approval, record-filing, or financial license for the type of business activities conducted by Shanghai Zihe and Shanghai Erxu. However, we cannot assure you that the regulatory authorities will hold the same view as ours or the business practice of Shanghai Zihe and Shanghai Erxu will be deemed to be in full compliance with all applicable laws and regulations. Given the evolving regulatory environment of the consumer finance industry, the regulatory authorities may issue new regulatory requirements, introducing a new licensing regime to regulate the type of business activities that Shanghai Zihe and Shanghai Erxu have been carrying out. If such new regulatory rules are promulgated, we cannot assure you that we would be able to obtain such new license or other regulatory approval in a timely manner, or at all, which would materially and adversely affect our business and our ability to continue our operations. As of the date of this annual report, we have not been subject to any material fines or other penalties under any PRC laws or regulations, including those governing the online consumer finance industry in China. However, if the governmental authorities adopt a stringent regulatory framework on the online consumer finance industry in the future which may subject Shanghai Zihe or any of our PRC subsidiaries to additional requirements, such as paid-up capital requirements, record-filing with the relevant regulators or license requirements, our business may be materially and adversely affected. It can be costly to comply with relevant laws and regulations and if our business practice is deemed to violate any existing or future laws and regulations, we may face injunctions, including orders to cease illegal activities, and may be exposed to other penalties as determined by the relevant government authorities as well.

In addition, Circular 141 further provides that financial institutions cooperating with third parties to engage in lending businesses (i) are not allowed to outsource any core lending business operations, such as credit assessment and risk management, to third parties, (ii) are not allowed to accept any credit enhancement provided by third parties without any license or approval to provide guarantees, including credit enhancement service in the form of a commitment to assume default risks, (iii) should comply with the judicial interpretations by the Supreme People’s Court of the PRC regarding interest rates in private lending regarding the annual borrowing cost charged to a borrower, i.e. interests plus other fees, and (iv) should ensure that third parties do not collect any interests or fees from borrowers. To comply with relevant regulatory requirements, Shanghai Zihe and Shanghai Erxu have taken various measures in cooperating with our institutional funding partners. For example, Shanghai Zihe and Shanghai Erxu (i) do not collect service fees directly from the borrowers of the loans recommended to the licensed institutional funding partners; (ii) make sure that the aggregate borrowing cost does not exceed 36%; (iii) involve licensed guarantee companies to provide guarantee to institutional funding partners for certain loans; and (iv) introduce borrowers and provides preliminary credit assessment services, as opposed to core lending business operations, to our institutional funding partners. If a borrower passes our preliminary credit assessment, we will introduce such borrower to our institutional funding partners. Borrower’s loan will be funded directly by our institutional funding partners if they decide to extend loans to such borrower after their independent credit review.

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However, Circular 141 is relatively new, and other relevant laws and regulations are also expected to continuously evolve in this newly emerging industry in which we operate. It remains uncertain how the regulatory authorities are going to interpret and enforce these rules. We cannot assure you that our existing cooperation with the institutional funding partners will not be deemed to violate Circular 141 or any other applicable laws, rules and regulations. For example, the regulatory environment concerning the online lending information intermediary industry has been tightening. Several provincial regulatory authorities have ordered online lending information intermediaries in those provinces to exit the market. Our institutional funding partners include third-party online lending information intermediaries. These third-party online lending information intermediaries generally match the borrowers introduced by us with investors on their platform. We cannot assure you that our cooperation with third-party online lending information intermediaries would not be deemed to be a violation of relevant regulatory requirements in these provinces. Due to such regulatory uncertainties, we have been reducing our cooperation with third-party online lending information intermediaries since the third quarter of 2019. As of December 31, 2019, the outstanding balance of loans on our platform funded by third-party online lending information intermediaries was RMB2.4 billion (US$0.3 billion).

Furthermore, we noticed in January 2020 that several internet media reported that the China Banking and Insurance Regulatory Commission was preparing to issue the Interim Measures for Commercial Banks Doing Online Lending Business, or the Interim Measures for Banks, pursuant to which the banks may collaborate with financing guarantee companies, e-commerce business companies, big data companies, information technology companies and loan collection companies in various online lending business processes and activities, including but not limited to client referral, joint loan origination, risk distribution, information technology and loan collection. However, the banks may not outsource its core risk management functions, such as credit assessment, risk control, credit drawdown, payment management and post-loan management, to the third-party partners. Each of the regional banks, which is an important category of our institutional funding partners, should (i) provide online lending services primarily to its local clients, (ii) be prudent to extend loans to borrowers who reside outside its region, and (iii) take appropriate measures to monitor the business operations when serving the clients who are located outside its region. The banks may not accept risk-free guarantees, in a direct or a disguised form, provided by the third-party partners. The banks may not accept credit enhancements, in a direct or a disguised form, provided by a third-party partner without financing guarantee license or credit security insurance license. The banks shall adopt appropriate measures to monitor the use of loan proceeds. With certain limited exceptions, the Interim Measures for Banks applies to the consumer finance companies when they conduct online lending business. We are unable to verify the authenticity and accuracy of those media reports. If those media reports are authentic and accurate in terms of the content of the Interim Measures for Banks, we will have to make adjustment to our business operations to make sure we fully comply with the Interim Measures for Banks after it is officially issued in the future.

We have been in a business model transformation these years and have gradually expanded our institutional funding partner base and the volume of loans funded by our institutional funding partners in recent years. In 2018 and 2019, the volume of the loans funded by institutional funding partners amounted to RMB8.9 billion and RMB51.0 billion (US$7.3 billion), representing 14.5% and 62.0% of our total loan origination volume, respectively. As the business transformation proceeds, our institutional funding partner base will increase and our cooperation with different types of institutional funding partners will expand. As a result, the level of regulatory risks and uncertainties we face will be higher than before.

Regulatory restrictions on institutional funding partners’ acceptance of credit enhancement may adversely affect our business and access to funding.

Pursuant to Circular 141, a bank, a trust management company, or a consumer financial company participating in loan facilitation transactions may not accept credit enhancement services and similar services, such as committing to assume default risks, provided by a third party which has not been licensed or approved to provide such services. In addition, pursuant to the Regulations on the Supervision and Administration of Financing Guarantee Companies promulgated by the State Council on August 2, 2017, or the Financing Guarantee Rules, any entity operating “financing guarantee business” is required to obtain an approval from the local regulatory authorities. If any entity operates financing guarantee business without such approval, it may be subject to penalties, including termination or suspension of business, fines ranging from RMB500,000 to RMB1,000,000, confiscation of illegal gains if any, and if the violation constitutes a criminal offense, criminal liability shall be imposed in accordance with the law. In October 2019, the China Banking and Insurance Regulatory Commission, together with eight other regulatory agencies jointly promulgated the Supplemental Rules to the Administration of Financing Guarantee Companies, or the Supplements to the Financing Guarantee Rules, which provides that any entity providing client referral or credit assessment services to the lending institutions may not provide financing guarantee services in a direct or a disguised form without the regulatory approval. If any entity operates financing guarantee business without appropriate approval, its business operations will be banned by the regulatory authorities and it will be required to properly settle existing business.

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In our collaboration with institutional funding partners, we introduce borrowers to our institutional funding partners and provide our institutional funding partners with our preliminary credit assessment on the creditworthiness of such borrowers. Our institutional funding partners independently review such borrowers’ loan requests and decide whether to extend loans to such borrowers and, if yes, the maximum amount of credit available for such borrowers. To attract and maintain our cooperation with institutional funding partners, we used to provide quality assurance commitments to them primarily through (i) repurchase of default loans, and (ii) setting aside security deposits with our own funds to ensure that we have enough cash to perform our repurchase obligations if the borrowers introduced by us default. In some cases, we are also required to replenish such security deposits from time to time.

In order to reduce our compliance risks under the Circular 141, the Financing Guarantee Rules, and the Supplements to the Financing Guarantee Rules, we have engaged licensed third-party financing guarantee companies or insurance companies to provide financing guarantees or insurances to a substantial majority of the loans funded by our institutional funding partners. If any borrower defaults, a third-party financing guarantee company is obligated to repay the full overdue amount to the corresponding institutional funding partner. After the financing guarantee company repays the full overdue amount, we are obligated to purchase creditor’s right from the third-party guarantee companies at a price equal to the repayment it made to the institutional funding partner. Under certain circumstances, we also provide security deposits through third-party financing guarantee companies for loans funded by certain institutional funding partners as an additional quality assurance commitment. Apart from licensed third-party financing guarantee companies, we also cooperate with third-party insurance companies to provide quality assurance commitments to our institutional funding partners. Under this arrangement, if any borrower introduced by us defaults, our institutional funding partners are able to seek insurance compensations under the insurance policies from third-party insurance companies. If the overdue amount exceeds the insurance coverage, the remaining overdue amount will be repaid by the third-party guarantee companies engaged by us.

Despite our efforts to reduce regulatory risks, we cannot assure you that relevant regulatory authorities would not interpret or view the quality assurance commitments we provided to our institutional funding partners through third-party guarantee companies as an operation of financing guarantee business in a disguised form without approval. If relevant government authorities take the view that the quality assurance commitments we provided to our institutional funding partners through third-party guarantee companies is a provision of financing guarantee in a disguised form without approval, we would be subject to fines and/or other administrative penalties mentioned above. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services.” As a result, our liquidity, business, financial condition and results of operations will be materially and adversely affected. If we do not provide quality assurance commitments to our institutional funding partners due to regulatory restrictions, we may not be able to maintain our institutional funding partner base and our liquidity, business, financial condition and results of operations will be materially and adversely affected.

In addition to engaging licensed third-party guarantee companies, we incorporated Fujian Zhiyun Financing Guarantee Company, or Fujian Zhiyun, on November 21, 2019. The establishment of Fujian Zhiyun has been approved by the Fujian Branch of Financial Administrative Bureau on November 11, 2019. In some cases, Fujian Zhiyun provides financing guarantee services directly to our institutional funding partners for the loans funded by them. Under the Financing Guarantee Regulations, the maximum amount of outstanding guarantee liabilities of a financing guarantee company may not exceed ten times of its net assets. As of March 31, 2020, the net asset of Fujian Zhiyun was RMB252.6 million (US$36.3 million). It is obvious that our own guarantee company cannot meet the needs of all of our institutional funding partners. We will have to continue to engage properly licensed third-party guarantee companies to provide quality assurance commitments to our institutional funding partners. As a result, the above regulatory risks still exist.

As of the date of this annual report, we have not been subject to any administrative penalties due to cooperating with our institutional funding partners.

As the amount of payment we are obligated to pay to third-party guarantee companies depends on the amount of default loans, we are subject to credit risks for those loans extended by our institutional funding partners to our borrowers. If we are unable to accurately assess the creditworthiness of the borrowers on our platform or if we fail to accurately anticipate and manage the delinquency rates of the loans funded by our institutional funding partners, we will not be able to maintain our credit risk exposure within acceptable parameters. If we are unable to effectively collect these delinquent loans, our liquidity, business operations, financial condition and results of operations would be materially and adversely affected.

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We collaborate with third-party trust management companies to set up trusts with other investors to extend loans through these trusts to borrowers introduced by us. We may be deemed to be an illegal financial institution under such trust arrangement, which may materially and adversely affect our business and financial condition.

We collaborate with third-party trust management companies to set up trusts with other investors to extend loans to borrowers introduced by us. Under this trust arrangement, we normally invest in subordinate tranches and other investors invest in senior tranches. The Measures for Banning of Illegal Financial Institutions and Illegal Financial Business Operations, or the Measures for Illegal Financial Institutions, promulgated by the State Council on July 13,1998, provides that the establishment of financial institution and the operation of financial business should be subject to the approval of People’s Bank of China, or PBOC. Pursuant to the Measures for Illegal Financial Institutions, extending loans without the approval of PBOC is deemed as illegal financial business operation and the entity extending loans without the approval of PBOC is deemed as an illegal financial institution. The online consumer finance industry is new and developing rapidly, and the regulatory environment has evolved since the promulgation of the Measures for Illegal Financial Institutions. There are uncertainties as to the interpretation of the Measures for Illegal Financial Institutions as well as whether such laws and regulations are applicable to us or our business. Although the trust management companies that administrate the trusts have been licensed and approved by the financial regulatory authorities to extend loans and we believe that the trust management companies are the lenders of the loans, we cannot assure you that the financial regulatory authorities will hold the same view as ours. Our investments in the trusts may be deemed to be extending loans to the borrowers and we may be deemed to be a lender under this trust arrangement. As a result of such trust arrangement, we may be deemed to be an illegal financial institution or operating illegal financial business, which may subject us to penalties, including confiscation of illegal gains together with a fine from one time to five times of the illegal gains, or a fine of RMB100,000 to RMB500,000 if there are no illegal gains, and criminal liability if the violation constitutes a criminal offense.

In addition, the Supreme People’s Court, the Supreme Peoples’ Procuratorate, the Ministry of Public Security, and the Ministry of Justice jointly issued the Guidance on Several Issues for Illegal Lending Regarding Criminal Case, or the Guidance on Illegal Lending, on July 23, 2019, which provides, among others, that (i) if any entity or individual is engaged in extending loans to the unspecified public individuals consistently for the purpose of profits and without the approval from the regulatory authorities or outside its business scope, which disturbs the stability of financial markets, such entity or individual may face a criminal charge of unfair competition and may be imposed criminal liability in accordance with the applicable laws and regulations; “extending loans to the unspecified public individuals consistently” refers to extending loans to entities and individuals no less than ten times within two years; and (ii) if the actual annual interest rate of the loans extended by such entity or individual exceeds 36%, it would be deemed as an aggravated circumstance when such entity or individual face the abovementioned criminal charge of unfair competition. The Guidance on Illegal Lending is new and does not provide a clear definition to calculate the actual annual interest rate, and it is still unclear how the regulatory authorities will interpret and implement it in the future. We cannot rule out the possibility that regulatory authorities may deem our operation activities under the trust arrangements as unfair competition and impose criminal liability on us. If that happens, our business, results of operations and financial condition would be materially and adversely affected.

If we are unable to retain existing borrowers or institutional funding partners or attract new borrowers or institutional funding partners, or if we are unable to maintain or increase the volume of loans facilitated through our platform, our business and results of operations will be adversely affected.

The volume of loans facilitated through our platform has grown rapidly over the past few years. The total origination amount of loans facilitated through our platform was RMB65.6 billion in 2017, RMB61.5 billion in 2018 and RMB82.2 billion (US$11.8 billion) in 2019. To maintain the high growth momentum of our platform, we must continuously increase the volume of loans by retaining current participants and attracting more users whose financing or investment needs can be met on our platform. If there are insufficient qualified loan requests, institutional funding partners may not be able to deploy their capital or their investors’ capital in a timely or efficient manner and may seek other investment opportunities. If there are insufficient funding commitments, borrowers may not be able to obtain capital through our platform and may turn to other sources for their borrowing needs. If we are unable to attract qualified borrowers and sufficient funding commitments or if borrowers and institutional funding partners do not continue to participate in our platform at the current rates due to any change we may be required to make to the way we conduct our business to ensure compliance with existing or new PRC laws and regulations or due to other business or regulatory reasons, we might not be able to increase our loan transaction volume and revenues as we expect, and our business and results of operations may be adversely affected. Normally the borrowers find us by downloading our mobile applications from application stores or from the pre-installed mobile applications or submitting loan requests on our website. In response to the general regulatory environment, the operators of application stores or mobile application distributing channels may adjust their application exhibition policies or even remove our mobile applications from their application stores or distribution channels, which may materially and adversely affect our ability to engage new borrowers.

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We are in the process of transforming our business model by expanding funding from institutional funding partners and at the same time reducing funding from individual investors. We have ceased facilitating new loans with funding from the individual investors on our platform since October 2019. Currently, our institutional funding partners primarily include commercial banks, consumer finance companies and trust management companies. A small portion of the loans on our platform are funded by some third-party online lending information intermediaries. Considering the regulatory uncertainties faced by the third-party online lending information intermediaries, we have been reducing our cooperation with third-party online lending information intermediaries since the third quarter of 2019. If we are unable to retain our existing institutional funding partners or attract new institutional funding partners, or if regulatory authorities promulgated new laws and regulations to regulate, limit, or even prohibit our collaboration with the institutional funding partners, our business, results of operations and financial condition will be adversely affected. As of December 31, 2019, we had over 30 institutional funding partners active on our platform. The loans funded by the institutional funding partners typically have fixed terms from six to twelve months.

Our success is dependent upon our ability to maintain and expand our cooperation with institutional funding partners on reasonable commercial terms. If the governmental authorities further tighten the regulations on the online consumer finance industry, our institutional funding partners would become more selective in choosing partners for referring borrowers and facilitating loans for them. The competition we face would become even more intensely. Our cooperation with institutional funding partners is not on an exclusive basis. If we fail to continuously meet their requirements or needs, our financial institution partners may stop cooperating with us and turn to our competitors, which may also materially and adversely affect our business, financial condition and results of operations.

If our existing and new products and services do not achieve sufficient market acceptance, our financial results and competitive position will be harmed.

We have devoted significant resources to, and will continue to emphasize on, upgrading and marketing our existing products and services and enhancing their market awareness. We also incur expenses and expend resources upfront to develop, acquire and market new products and services that incorporate additional features, improve functionality or otherwise make our platform more desirable to borrowers and investors. New products and services must achieve high levels of market acceptance in order for us to recoup our investment in developing, acquiring and bringing them to market.

Our existing and new products and services could fail to attain sufficient market acceptance for many reasons, including:

• borrowers may not find terms of our products, such as costs and credit limit, competitive or appealing;

• our failure to predict market demand accurately and provide products and services that meet this demand in a timely fashion;

• borrowers and investors using our platform may not like, find useful or agree with, any changes;

• defects, errors or failures on our platform;

• negative publicity about our loan products or our platform’s performance or effectiveness;

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• views taken by regulatory authorities that the new products, services or platform changes do not comply with PRC laws, regulations or rules applicable to us; and

• the introduction or anticipated introduction of competing products by our competitors.

If our existing and new products and services do not achieve adequate acceptance in the market, our competitive position, results of operations and financial condition could be harmed.

Our business currently primarily focuses on the PRC market. We are currently also expanding our business in the overseas market. In June 2018, we established a subsidiary in Indonesia and have received a license for Technology and Information Based Financial Lending Institution (peer-to-peer lending license) from the Financial Services Authority of Indonesia in December 2019. Our overseas business operations subject us to additional risks and uncertainties. In particular, we will face complex local regulatory environment that we are not familiar with. As a result, we may incur substantial compliance costs to carry out our business operations in the overseas market and still be subject to potential litigations, regulatory proceedings, penalties or incur other costs. As we have very limited experience in operating our business in the overseas market, our products may not be accepted by users in the overseas market, we may be unable to attract a sufficient number of users, fail to anticipate competitive conditions or face difficulties in operating effectively in the overseas market. In addition, trade barriers, such as import and export restrictions, customs duties and other taxes, competition law regimes and other trade restrictions, as well as other risks such as political instability may also expose us to additional risks and uncertainties if we expand our business in the overseas market.

Interest rates of certain of our loan products exceed the statutory interest rate limit and therefore part of the interests is not enforceable through the PRC judicial system.

According to the relevant PRC laws and regulations, in the context of lending activities between individuals, entities or other organizations that are not licensed financial institutions, if the interest rate of a loan exceeds 36% per annum, the exceeding part of the interest rate is invalid and void; if the interest rate of a loan exceeds 24% per annum but is no more than 36% per annum, the exceeding part will be treated as natural obligation—valid but not enforceable in the PRC judicial system, while the enforceability of the 24% per annum part will not be affected. In addition, on August 4, 2017, the Supreme People’s Court promulgated the Circular of Several Suggestions on Further Strengthening the Judicial Practice Regarding Financial Cases, which provides, among others, that (i) the claim of a borrower under a financial loan agreement to adjust or cut down the part of interest exceeding 24% per annum on the basis that the aggregate amount of interest, compound interest, default interest, liquidated damages and other fees collectively claimed by the lender is overly high shall be supported by the PRC courts; (ii) in the context of online finance disputes, if the online lending information intermediary platforms and the lender circumvent the upper limit of the judicially protected interest rate by charging intermediary fee, it shall be ruled as invalid; and (iii) private lending transaction is defined as lending between individuals, legal persons and other organizations. Loans funded by financial institutions which are licensed by financial regulatory authorities are not private lending transactions. In December 2017, the Circular 141 promulgated by relevant PRC government authorities further clarifies that in the context of “cash loan” business operated by various types of institutions, the aggregated borrowing costs (as opposed to interest rate) of borrowers charged by “cash loan” business operators in the forms of interest and various fees should be annualized and subject to the limit on interest rate of private lending set forth in the Private Lending Judicial Interpretations issued by the Supreme People’s Court, i.e. the aforesaid 24% per annum limit and the 36% per annum limit. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services—Regulations on online lending information services” for more details.

We calculate the aggregate borrowing cost of the loans on our online consumer finance platform on the basis of annual percentage rate, or APR. Historically, we had some loan products with aggregated borrowing costs that exceeded the 36% per annum limit. These products were mainly our (i) handy cash loan products, and (ii) a small number of standard loan products. We ceased to offer new handy cash loan products upon the promulgation of Circular 141 and adjusted the fee rate of the standard loan products. Since making the adjustments on December 14, 2017, the annualized aggregated borrowing cost of all of the products newly listed on our platform calculated on APR basis have been in full compliance with this aggregated borrowing cost cap requirement.

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We also have certain loans facilitated by our platform with interest rate over 24% per annum. For the years ended December 31, 2017, 2018 and 2019, loans with interest rate over 24% totaled RMB5.1 billion, RMB8.1 billion and RMB15.2 billion (US$2.2 billion), respectively, representing 7.7%, 13.2% and 18.5% of the total loan origination volume in the respective periods. These loans have a term ranging from one month to 36 months. As of December 31, 2019, of the total outstanding balance of loans with interest rate over 24% per annum, 3.3% was 15 to 89 calendar days past due and 2.0% was 90 to 179 calendar days past due. We may continue to facilitate loans at or above the interest rate of 24% but the aggregate borrowing cost on APR basis will be no more than 36% per annum. In the event that any of such loans become delinquent, we will not be able to collect the part of interests that exce