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, 2022

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)

N/A

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

Building G1, No. 999 Dangui Road

Pudong New District, Shanghai 201203

The People’s Republic of China

(Address of principal executive offices)

Jiayuan Xu, Chief Financial Officer

Phone: +86 21 8030 3200

Email: xujiayuan@xinye.com

Building G1, No. 999 Dangui Road

Pudong New District, Shanghai 201203

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, 2022, there were 1,413,196,769 ordinary shares outstanding, consisting of 843,996,769 Class A ordinary shares and 569,200,000 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.  ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.  ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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 Standard 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	78
ITEM 4A.	UNRESOLVED STAFF COMMENTS	122
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	122
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	141
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	152
ITEM 8.	FINANCIAL INFORMATION	152
ITEM 9.	THE OFFER AND LISTING	154
ITEM 10.	ADDITIONAL INFORMATION	154
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	166
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	167
PART II		169
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	169
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	169
ITEM 15.	CONTROLS AND PROCEDURES	169
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	170
ITEM 16B.	CODE OF ETHICS	170
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	170
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	171
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	171
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	171
ITEM 16G.	CORPORATE GOVERNANCE	171
ITEM 16H.	MINE SAFETY DISCLOSURE	172
ITEM 16I.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	172
ITEM 16J.	INSIDER TRADING POLICIES	173
PART III		174
ITEM 17.	FINANCIAL STATEMENTS	174
ITEM 18.	FINANCIAL STATEMENTS	174
ITEM 19.	EXHIBITS	174
SIGNATURES		179

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. The transaction service fee is collected from third party guarantee companies and, if applicable, the institutional funding partners 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;

• 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;

• “outstanding loan balance” in the China market as of a given date refers to the balance of outstanding loans delinquent within 180 days from such date;

• “outstanding loan balance of the overseas markets” as of a given date refers to the balance of outstanding loans delinquent within 30 days from such date;

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

• “overseas markets” refers to our overseas markets outside China;

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

• “SEC” refers to the U.S. Securities and Exchange Commission;

• “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, our Cayman Islands holding company, its direct and indirect subsidiaries. We conduct operations in China through (i) our PRC subsidiaries, (ii) the consolidated variable interest entities with which we have maintained contractual arrangements, including Beijing Paipairongxin Investment Consulting Co., Ltd., Shanghai Zihe Information Technology Group Co., Ltd., and Shanghai Ledao Technology Co., Ltd., and (iii) the subsidiaries of the consolidated variable interest entities. The consolidated variable interest entities are PRC companies conducting operations in China, and their financial results have been consolidated into our consolidated financial statements in accordance with U.S. GAAP for accounting purposes. Investors are purchasing an interest in FinVolution Group, a Cayman Islands holding company with no operations of its own. FinVolution Group does not have any equity ownership in the consolidated variable interest entities.

Our reporting currency is the Renminbi because our business is mainly conducted in China and substantially 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 RMB6.8972 to US$1.00, the noon buying rate on December 30, 2022 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 21, 2023, the noon buying rate set forth in the H.10 statistical release of the Federal Reserve Board was RMB6.8920 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;

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

• our expectations regarding our relationships with institutional funding partners 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

Our Holding Company Structure and Contractual Arrangements with the Consolidated Variable Interest Entities

The following diagram illustrates our corporate structure as of the date of this annual report, including our principal subsidiaries and our principal consolidated variable interest entities and their principal subsidiaries.

4

Notes:

(1) Beijing Paipairongxin currently has four shareholders: Jun Zhang, our co-founder and director, Tiezheng Li, our co-founder, vice chairman, president and chief executive officer, Honghui Hu, our co-founder and director, and Shaofeng Gu, our co-founder, chairman and chief innovation officer, each holding 13.22%, 4.81%, 12.85%, and 69.12% of Beijing Paipairongxin’s equity interests, respectively.

5

(2) Shanghai Zihe currently has four shareholders: Jun Zhang our co-founder and director, Tiezheng Li, our co-founder, vice chairman, president and chief executive officer, Honghui Hu, our co-founder and director, Shaofeng Gu, our co-founder, chairman and chief innovation officer, each holding 25% of Shanghai Zihe’s equity interests, respectively.

(3) Shanghai Ledao currently has two shareholders: Lizhong Chen, a family relative of Tiezheng Li, and Yejun Jiang, a family relative of Honghui Hu, each holding 50% of Shanghai Ledao’s equity interests, respectively.

(4) The rest of the 20% equity interests are held by an independent third party.

FinVolution Group is not an operating company in China but a Cayman Islands holding company with no equity ownership in the consolidated variable interest entities. We conduct operations in China through (i) our PRC subsidiaries, (ii) the consolidated variable interest entities with which we have maintained contractual arrangements, and (iii) the subsidiaries of the consolidated variable interest entities. PRC laws and regulations restrict and impose conditions on foreign investment in value-added telecommunications services business, such as the internet content provision services and online data processing and transaction processing services. Accordingly, we operate these businesses in China through the consolidated variable interest entities and their respective subsidiaries, and rely on contractual arrangements among our PRC subsidiaries, the consolidated variable interest entities and their respective shareholders to direct the activities of operation of the consolidated variable interest entities and their respective subsidiaries. This structure provides investors with exposure to foreign investment in China-based companies where PRC laws and regulations prohibit or restrict direct foreign investment in operating companies in certain sectors. Revenues contributed by the consolidated variable interest entities and their respective subsidiaries accounted for 92.5%, 88.0% and 83.9% of our total revenues for 2020, 2021 and 2022, respectively. As used in this annual report, “we,” “us,” “our company” and “our” refer to FinVolution Group, its subsidiaries, and, in the context of describing our operations in China and consolidated financial information, the consolidated variable interest entities and their respective subsidiaries in China, including but not limited to (i) Beijing Paipairongxin Investment Consulting Co., Ltd., or Beijing Paipairongxin, which was established in June 2012; (ii) Shanghai PPDai Financial Information Service Co., Ltd., or Shanghai PPDai, a subsidiary of Beijing Paipairongxin, which was established in January 2011 and operates our ppdai.com website and PPDai mobile application and used to engage in our historical business of online lending information intermediary; (iii) Hefei PPDai Information Technology Co., Ltd., or Hefei PPDai, a subsidiary of Shanghai PPDai, which was established in December 2016 and holds the value-added telecommunication business operation license, or the VATS License, for operation of call center services; (iv) Shanghai Erxu Information Technology Co., Ltd., or Shanghai Erxu, a subsidiary of Shanghai Zihe, which was established in April 2018 and primarily engages in the business of introducing borrowers to institutional funding partners to match transactions; and (v) Shanghai Ledao Technology Co., Ltd., or Shanghai Ledao, which was established in January 2019 and currently does not engage in any business operations. The consolidated variable interest entities are PRC companies conducting operations in China, and their financial results have been consolidated into our consolidated financial statements under U.S. GAAP for accounting purposes. Holders of our ADSs hold equity interest in FinVolution Group, our Cayman Islands holding company, and do not and may never have direct or indirect equity interest in the consolidated variable interest entities and their subsidiaries.

A series of contractual agreements, including loan agreements, business operation agreement, power of attorney, equity pledge agreement, exclusive technology consulting and service agreement and call option agreement, have been entered into by and among our subsidiaries, the consolidated variable interest entities and their respective shareholders. Terms contained in each set of contractual arrangements with the consolidated variable interest entities and their respective shareholders are substantially similar. The contractual arrangements enable us to direct the activities of operation that most significantly impact the economic performance of the consolidated variable interest entities and provide us with economic benefits of the consolidated variable interest entities and as such we are the primary beneficiary of these companies, and we have consolidated the financial results of these companies in our consolidated financial statements. For more details of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements.”

However, the contractual arrangements may not be as effective as equity ownership in providing us with control over the consolidated variable interest entities and we may incur substantial costs to enforce the terms of the arrangements. In addition, these agreements have not been tested in China courts. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with the consolidated variable interest entities for a significant portion of our business operations, and such contractual arrangements may not be as effective as equity ownership in providing operational control” and “—The shareholders of the consolidated variable interest entities may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.”

6

There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules regarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with the consolidated variable interest entities and their shareholders. It is uncertain whether any new PRC laws or regulations relating to consolidated variable interest entity structures will be adopted or if adopted, what they would provide. If we or any of the consolidated variable interest entities is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government deems that the contractual arrangements in relation to the consolidated variable interest entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.”

Our corporate structure is subject to risks associated with our contractual arrangements with the consolidated variable interest entities. If the PRC government deems that our contractual arrangements with the consolidated variable interest entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company, our PRC subsidiaries, the consolidated variable interest entities and their respective subsidiaries, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the consolidated variable interest entities and, consequently, significantly affect the financial performance of the consolidated variable interest entities and our company as a whole. The PRC regulatory authorities could disallow the contractual arrangements structure, which would likely result in a material change in our operations and cause the value of our securities to significantly decline or become worthless. For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”

We face various legal and operational risks and uncertainties related to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshore offerings and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments, or list on a United States or other foreign exchange. These risks could result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline or become worthless. For a detailed description of risks related to doing business in China, please refer to risks disclosed under “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China.”

PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations, including data security related regulations, in this nature may cause the value of such securities to significantly decline. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs.”

Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ADSs. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us” and “—We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.”

7

The Holding Foreign Companies Accountable Act

Pursuant to the Holding Foreign Companies Accountable Act, or the HFCA Act, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the Public Company Accounting Oversight Board, or the PCAOB, for two consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor.

In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCA Act following the filing of this annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCA Act after we file this annual report on Form 20-F. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. If PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we continue to use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. There can be no assurance that we would not be identified as a Commission-Identified Issuer for any future fiscal year, and if we were so identified for two consecutive years, we would become subject to the prohibition on trading under the HFCA Act. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections” and “—Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.”

Permissions Required from the PRC Authorities for Our Operations

Our operations in China are governed by PRC laws and regulations. As of the date of this annual report, our PRC subsidiaries and consolidated variable interest entities and their respective subsidiaries have obtained the requisite licenses and permits from the PRC government authorities that are material for the business operations of our holding company and the consolidated variable interest entities in China, except that Shanghai PPDai has not obtained any VATS License. Due to the lack of regulatory authorities’ final interpretation of the applicable laws, there still exists uncertainties on which category of VATS License that may be applicable to Shanghai PPDai as the operator of our ppdai.com website and PPDai mobile application, and therefore Shanghai PPDai has not obtained any VATS License. We cannot rule out the possibility that Shanghai PPDai may be deemed by certain regulatory authorities as operating our ppdai.com website and PPDai mobile application without an appropriate VATS License and we may be subject to regulatory penalties, including, but not limited to, rectification orders and warnings, fines, confiscation of illegal gains, and suspension or termination of operating of our website and mobile application. In addition, given the rapid evolving of the online consumer finance industry and the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform in the future. For example, when Shanghai Erxu provides the service of introducing borrowers to our institutional funding partners to match transactions, it also provides the preliminary credit assessment services to our institutional funding partners for the borrowers referred by it, and if the preliminary credit assessment services provided by Shanghai Erxu to our institutional funding partners are deemed by the regulatory authorities as the credit reference business or information provision activities, Shanghai Erxu may be required to obtain a license for individual credit reference business, or alternatively, pursue cooperation with licensed credit reference agencies and submit the relevant cooperation agreement with the People’s Bank of China, or the PBOC or its provincial branches. If we cannot obtain the regulatory approval or complete the filing in a timely manner, we may be deemed as violating the applicable laws and regulations of credit reference services and subject to regulatory penalties, including cessation of business operations, confiscation of illegal gains, fines from RMB50,000 to RMB500,000, and even criminal liability. If we, our subsidiaries, the consolidated variable interest entities or their subsidiaries do not receive or maintain any necessary permissions or approvals from PRC authorities to operate business or offer securities, or inadvertently conclude that such permissions or approvals are not required, or if applicable laws, regulations, or interpretations change and we are required to obtain such permissions or approvals in the future, we cannot assure you that we will be able to obtain the necessary permissions or approvals in a timely manner, or at all, and such approvals may be rescinded even if obtained. Any such circumstance could subject us to penalties, including fines, suspension of business and revocation of required licenses, significantly limit or completely hinder our ability to continue to offer securities to investors, and cause the value of such securities to significantly decline or become worthless. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—The laws and regulations governing online consumer finance 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.”

8

Furthermore, as advised by Hui Ye Law Firm, our PRC counsel, in connection with our historical issuance of securities to foreign investors, under current PRC laws, regulations and regulatory rules, as of the date of this annual report, we, our PRC subsidiaries and the consolidated variable interest entities, (i) are not required to obtain permissions from the China Securities Regulatory Commission, or the CSRC, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, and (iii) have not received or were denied such requisite permissions by any PRC authority. However, if the relevant PRC governmental authorities determine that our business may affect national security, they may initiate cybersecurity review against us. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Any failure to comply with existing or future laws and regulations related to data protection, data security, cybersecurity or personal information protection could lead to liabilities, administrative penalties or other regulatory actions, which could negatively affect our operating results and business.”

However, the PRC government has recently promulgated certain regulations and rules to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. On February 17, 2023, the CSRC published the Trial Administrative Measures on the Overseas Issuance and Listing of Securities by Domestic Companies, or the Trial Measures, and five supporting guidelines, effective on March 31, 2023. Pursuant to the Trial Measures, domestic companies in the PRC that directly or indirectly offer or list their securities in an overseas market are required to file with the CSRC. In addition, an overseas listed company must also submit the filing with respect to its follow-on offerings, issuance of convertible corporate bonds and exchangeable bonds, and other equivalent offering activities, within a specific time frame requested under the Trial Measures. Therefore, we will be required to file with the CSRC for our overseas offering of equity and equity linked securities in the future within the applicable scope of the Trial Measures. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.”

Enforceability of Civil Liabilities

We are incorporated in the Cayman Islands to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as:

• political and economic stability;

• an effective judicial system;

• a favorable tax system;

• the absence of exchange control or currency restrictions; and

• the availability of professional and support services.

However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to:

9

• the Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors as compared to the United States; and

• Cayman Islands companies may not have standing to sue before the federal courts of the United States.

Our constituent documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

Substantially all of our operations are conducted in China, and substantially all of our assets are located in China. A majority of our directors and executive officers are nationals or residents of jurisdictions other than the United States and a significant portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these individuals, or to bring an action against us or against these individuals in the United States, in the event that you believe that your rights have been infringed under the securities laws of the United States or any state in the United States.

Maples and Calder (Hong Kong) LLP, our legal counsel as to Cayman Islands law, and Hui Ye Law Firm, our legal counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:

• recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

• entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

We have been advised by our Cayman Islands legal counsel, Maples and Calder (Hong Kong) LLP, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the securities laws of the United States or any State; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the securities laws of the United States or any State, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For such a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

Hui Ye Law Firm has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States or the Cayman Islands. Under the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law against us in the PRC, if they can establish sufficient nexus to the PRC for a PRC court to have jurisdiction, and meet other procedural requirements, including, among others, the plaintiff must have a direct interest in the case, and there must be a concrete claim, a factual basis and a cause for the suit. However, it would be difficult for foreign shareholders to establish sufficient nexus to the PRC by virtue only of holding our ADSs or ordinary shares.

10

Cash and Asset Flows through Our Organization

FinVolution Group is a holding company with no operations of its own. We conduct operations in China primarily through our subsidiaries and the consolidated variable interest entities and their respective subsidiaries in China. As a result, although other means are available for us to obtain financing at the holding company level, FinVolution Group’s ability to pay dividends to the shareholders and investors of the ADSs and to service any debt it may incur may depend upon dividends paid by our PRC subsidiaries and service fees paid by the consolidated variable interest entities in China. If any of our PRC subsidiaries or the consolidated variable interest entities incurs debt on its own behalf in the future, the instruments governing such debt may restrict our PRC subsidiaries’ ability to pay dividends to FinVolution Group or the consolidated variable interest entities’ ability to pay service fees. In addition, our PRC subsidiaries are permitted to pay dividends to FinVolution Group only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Further, our PRC subsidiaries and the consolidated variable interest entities are required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. For more details, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Holding Company Structure.”

Under PRC laws and regulations, our PRC subsidiaries and the consolidated variable interest entities are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject to examination by the banks designated by SAFE. The amounts restricted include the paid-up capital and the statutory reserve funds of our PRC subsidiaries and the net assets of the consolidated variable interest entities in which we have no legal ownership, totaling RMB6.3 billion, RMB7.8 billion and RMB8.0 billion (US$1.2 billion) as of December 31, 2020, 2021 and 2022, respectively. Furthermore, cash transfers from our PRC subsidiaries and the consolidated variable interest entities to entities outside of China are subject to PRC government controls on currency conversion. To the extent cash in our business is in the PRC or a PRC entity, such cash may not be available to fund operations or for other use outside of the PRC due to restrictions and limitations imposed by the governmental authorities on the ability of us, our subsidiaries, or the consolidated variable interest entities to transfer cash outside of the PRC. Shortages in the availability of foreign currency may temporarily delay the ability of our PRC subsidiaries and the consolidated variable interest entities to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. In view of the foregoing, to the extent cash in our business is held in China or by a PRC entity, such cash may not be available to fund operations or for other use outside of the PRC. For risks relating to the fund flows of our operations in China, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business” and “—Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the price of our ADSs.”

For the years ended December 31, 2020, 2021 and 2022, no dividends or distributions were made to FinVolution Group, the parent company, by our subsidiaries.

Under PRC law, FinVolution Group may provide funding to our PRC subsidiaries only through capital contributions or loans, and to our PRC consolidated variable interest entities only through loans, subject to satisfaction of applicable government registration and approval requirements.

As of December 31, 2022, FinVolution Group, the parent company, had made cumulative capital contribution of RMB1,291.4 million (US$187.2 million) to our PRC subsidiaries through intermediate holding companies.

The consolidated variable interest entities may transfer cash to the relevant PRC subsidiaries by paying service fees according to the restated exclusive technology consulting and service agreement or the exclusive technology consulting and service framework agreements, as applicable. Pursuant to these agreements between each of the consolidated variable interest entities and its corresponding PRC subsidiary, each of the consolidated variable interest entities agrees to pay the relevant PRC subsidiary for technology consulting and service at an amount as determined on a case-by-case basis based on the content of technology consulting and service, level of difficulty and complexity, time spend by the relevant PRC subsidiary and its employees, the commercial value of the technology consulting and service to be provided by the relevant PRC subsidiary, and the revenue the consolidated variable interest entity generates due to the technology consulting and service provided by the relevant PRC subsidiary. For the years ended December 31, 2020, 2021 and 2022, the service fees paid by the consolidated variable interest entities to the PRC subsidiaries through technical development service arrangements and technical support service arrangements were RMB2,143.2 million, RMB2,313.2 million and RMB3,598.8 million (US$521.8 million), respectively. If there is any amount payable to relevant PRC subsidiaries under the contractual arrangements, the consolidated variable interest entities will settle the amount accordingly.

11

The following is a summary of cash transfers that have occurred between our subsidiaries and the consolidated variable interest entities:

	For the Year Ended December 31,
	2020			2021			2022
	(RMB in thousands)
Cash paid by the consolidated variable interest entities to our subsidiaries under service agreements 1		(2,143,205	)		(2,313,224	)		(3,598,761	)
Cash received by the consolidated variable interest entities from our subsidiaries under service agreements 2		137,624			534,988			650,751
Capital contribution by the consolidated variable interest entities to our subsidiaries for intra-group investing 3		—			(22,432	)		(10,020	)
Collection of loans by the consolidated variable interest entities from our subsidiaries for intra-group investing 4		—			389,043			72,373
Cash paid as loans by the consolidated variable interest entities to our subsidiaries for intra-group investing 5		—			(2,328,235	)		(304,533	)
Repayment of loans by the consolidated variable interest entities to our subsidiaries for intra-group financing 6		—			(164,719	)		(134,307	)
Cash received as loans by the consolidated variable interest entities from our subsidiaries for intra-group financing 7		—			1,785,238			1,533,401

Notes:

1. Represents “Cash used in operating activities under service agreements for Intercompany” of the consolidated variable interest entities and their subsidiaries as in the condensed consolidating schedule of cash flow data which represents the cash paid by the variable interest entities for intercompany services, including technical development services and technical support services.

2. Represents “Cash provided by operating activities under service agreements for Intercompany” of the consolidated variable interest entities and their subsidiaries as in the condensed consolidating schedule of cash flow data which represents the cash received by the variable interest entities for intercompany services, including technical development services and technical support services.

3. Represents “Capital contribution to Group companies” of the consolidated variable interest entities and their subsidiaries as in the condensed consolidating schedule of cash flow data which represents the capital contribution by the variable interest entities to group companies.

4. Represents “Collection of loans from Group companies” of the consolidated variable interest entities and their subsidiaries as in the condensed consolidating schedule of cash flow data which represents the collection of loans by the variable interest entities from group companies.

5. Represents “Cash paid as loans extended to Group companies” of the consolidated variable interest entities and their subsidiaries as in the condensed consolidating schedule of cash flow data which represents the cash paid as loans by the variable interest entities to group companies.

6. Represents “Repayment of loans to Group companies” of the consolidated variable interest entities and their subsidiaries as in the condensed consolidating schedule of cash flow data which represents the repayment of loans by the variable interest entities to group companies.

7. Represents “Cash received as loans from Group companies” of the consolidated variable interest entities and their subsidiaries as in the condensed consolidating schedule of cash flow data which represents the cash received as loans by the variable interest entities from group companies.

For the years ended December 31, 2020, 2021 and 2022, no transfers of other assets, dividends or distributions were made between the holding company, our subsidiaries, and consolidated variable interest entities.

Our board of directors declared dividends in every March from 2019 to 2023. In addition, in March 2022, our board of directors approved an annual cash dividend policy, pursuant to which we will declare and distribute a recurring cash dividend at an amount of no less than 10% of our net income after tax in the previous fiscal year in the future. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” For PRC and United States federal income tax considerations of an investment in our ADSs, see “Item 10. Additional Information—E. Taxation.”

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For the years ended December 31, 2020, 2021 and 2022, dividends made to U.S. investors were RMB263.6 million, RMB317.6 million and RMB372.5 million (US$54.0 million).

For purposes of illustration, the following discussion reflects the hypothetical taxes that might be required to be paid within China, assuming that: (i) we have taxable earnings, and (ii) we determine to pay a dividend in the future according to our dividend policy:

	Taxation Scenario (i)
	Statutory Tax and Standard Rates
Hypothetical pre-tax earnings (ii)		100	%
Tax on earnings at statutory rate of 25% (iii)		(25	)%
Net earnings available for distribution		75	%
Withholding tax at standard rate of 10% (iv)		(7.5	)%
Net distribution to parent/shareholders		67.5	%

Notes:

(i) For purposes of this example, the tax calculation has been simplified. The hypothetical book pre-tax earnings amount, not considering timing differences, is assumed to equal taxable income in China.

(ii) Under the terms of contractual arrangements, our PRC subsidiaries may charge the consolidated variable interest entities for services provided to the consolidated variable interest entities. These fees shall be recognized as expenses of the consolidated variable interest entities, with a corresponding amount as service income by our PRC subsidiaries and eliminate in consolidation. For income tax purposes, our PRC subsidiaries and the consolidated variable interest entities file income tax returns on a separate company basis. The fees paid are recognized as a tax deduction by the consolidated variable interest entities and as income by our PRC subsidiaries and are tax neutral.

(iii) Certain of our PRC subsidiaries and the consolidated variable interest entities qualifies for a 15% preferential income tax rate in China. However, such rate is subject to qualification, is temporary in nature, and may not be available in a future period when distributions are paid. For purposes of this hypothetical example, the table above reflects a maximum tax scenario under which the full statutory rate would be effective.

(iv) The PRC Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise to its immediate holding company outside of China. A lower withholding income tax rate of 5% is applied if the foreign invested enterprise’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with China, subject to a qualification review at the time of the distribution. For purposes of this hypothetical example, the table above assumes a maximum tax scenario under which the full withholding tax would be applied.

The table above has been prepared under the assumption that all profits of the consolidated variable interest entities will be distributed as fees to our PRC subsidiaries under tax neutral contractual arrangements. If, in the future, the accumulated earnings of the consolidated variable interest entities exceed the fees paid to our PRC subsidiaries (or if the current and contemplated fee structure between the intercompany entities is determined to be non-substantive and disallowed by Chinese tax authorities), the consolidated variable interest entities could, as a matter of last resort, make a non-deductible transfer to our PRC subsidiaries for the amounts of the stranded cash in the consolidated variable interest entities. This would result in such transfer being non-deductible expenses for the consolidated variable interest entities but still taxable income for the PRC subsidiaries. Such a transfer and the related tax burdens would reduce our after-tax income to approximately 50.6% of the pre-tax income. Our management believes that there is only a remote possibility that this scenario would happen.

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Financial Information Related to the Consolidated Variable Interest Entities

The following table presents the condensed consolidating schedule of financial position for the consolidated variable interest entities and other entities as of the dates presented.

Condensed Consolidating Statements of Income Information

	For the Year Ended December 31, 2022
	FinVolution Group			Company Subsidiaries			Primary Beneficiary of Consolidated Variable Interest Entities			Consolidated Variable Interest Entities and Their Subsidiaries			Eliminations			Consolidated Total
	(RMB in thousands)
Third-party revenues		—			1,790,631			3,141			9,340,431			—			11,134,203
Inter-company revenues(1)		—			3,296,525			14,431			535,053			(3,846,009	)		—
Net revenues		—			5,087,156			17,572			9,875,484			(3,846,009	)		11,134,203
Third-party expenses		(20,027	)		(1,012,268	)		(17,525	)		(3,567,004	)		—			(4,616,824	)
Inter-company expenses(1)		—			(501,323	)		(1,006	)		(3,343,680	)		3,846,009			—
Related party expenses		—			—			—			(37	)		—			(37	)
Provision for accounts receivable and contract assets		—			(106,498	)		—			(284,384	)		—			(390,882	)
Provision for loans receivable		—			(324,351	)		1,239			(92,790	)		—			(415,902	)
Credit losses for quality assurance commitment		—			(213,884	)		—			(2,981,336	)		—			(3,195,220	)
Total operating expenses		(20,027	)		(2,158,324	)		(17,292	)		(10,269,231	)		3,846,009			(8,618,865	)
Income (loss) from subsidiaries(2)		2,287,509			(254,159	)		2,479,647			2,379			(4,515,376	)		—
Loss of the consolidated variable interest entities		—			—			(255,886	)		—			255,886			—
Income from operations		2,267,482			2,674,673			2,224,041			(391,368	)		(4,259,490	)		2,515,338
Other income, net		(1,100	)		61,729			1,340			158,724			—			220,693
Profit before income tax expenses		2,266,382			2,736,402			2,225,381			(232,644	)		(4,259,490	)		2,736,031
Income tax expenses		—			(431,640	)		107			(23,242	)		—			(454,775	)
Net profit		2,266,382			2,304,762			2,225,488			(255,886	)		(4,259,490	)		2,281,256
Net loss attributable to non-controlling interest shareholders		—			(17,253	)		—			—			2,379			(14,874	)
Net profit attributable to FinVolution Group’s ordinary shareholders		2,266,382			2,287,509			2,225,488			(255,886	)		(4,257,111	)		2,266,382

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Condensed Consolidating Statements of Income Information

	For the Year Ended December 31, 2021
	FinVolution Group			Company Subsidiaries			Primary Beneficiary of Consolidated Variable Interest Entities			Consolidated Variable Interest Entities and Their Subsidiaries			Eliminations			Consolidated Total
	(RMB in thousands)
Third-party revenues		—			1,132,093			4,057			8,333,978			—			9,470,128
Inter-company revenues(1)		—			2,545,816			16,400			796,071			(3,358,287	)		—
Net revenues		—			3,677,909			20,457			9,130,049			(3,358,287	)		9,470,128
Third-party expenses		(18,617	)		(892,810	)		(18,850	)		(3,441,504	)		—			(4,371,781	)
Inter-company expenses(1)		—			(812,471	)		—			(2,545,816	)		3,358,287			—
Related party expenses		—			—			—			(7,503	)		—			(7,503	)
Provision for accounts receivable and contract assets		—			(4,288	)		—			(134,938	)		—			(139,226	)
Provision for loans receivable		—			(406,560	)		—			32,317			—			(374,243	)
Credit losses for quality assurance commitment		—			—			—			(1,963,609	)		—			(1,963,609	)
Total operating expenses		(18,617	)		(2,116,129	)		(18,850	)		(8,061,053	)		3,358,287			(6,856,362	)
Income (loss) from subsidiaries(2)		2,526,062			1,015,784			1,351,628			(448	)		(4,893,026	)		—
Income of the consolidated variable interest entities		—			—			1,017,759			—			(1,017,759	)		—
Income from operations		2,507,445			2,577,564			2,370,994			1,068,548			(5,910,785	)		2,613,766
Other income, net		1,502			26,847			345			93,674			—			122,368
Profit before income tax expenses		2,508,947			2,604,411			2,371,339			1,162,222			(5,910,785	)		2,736,134
Income tax expenses		—			(92,428	)		(3,927	)		(144,463	)		—			(240,818	)
Net profit		2,508,947			2,511,983			2,367,412			1,017,759			(5,910,785	)		2,495,316
Net loss attributable to non-controlling interest shareholders		—			14,079			—			—			(448	)		13,631
Net profit attributable to FinVolution Group’s ordinary shareholders		2,508,947			2,526,062			2,367,412			1,017,759			(5,911,233	)		2,508,947

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Condensed Consolidating Statements of Income Information

	For the Year Ended December 31, 2020
	FinVolution Group			Company Subsidiaries			Primary Beneficiary of Consolidated Variable Interest Entities			Consolidated Variable Interest Entities and Their Subsidiaries			Eliminations			Consolidated Total
	(RMB in thousands)
Third-party revenues		—			533,106			36,882			6,993,099			—			7,563,087
Inter-company revenues(1)		—			1,098,946			48,303			159,319			(1,306,568	)		—
Net revenues		—			1,632,052			85,185			7,152,418			(1,306,568	)		7,563,087
Third-party expenses		(20,720	)		(581,725	)		(26,690	)		(2,000,511	)		—			(2,629,646	)
Inter-company expenses(1)		—			(159,319	)		(18,086	)		(1,129,163	)		1,306,568			—
Related party expenses		—			—			—			(10,104	)		—			(10,104	)
Provision for accounts receivable and contract assets		—			(28,274	)		—			(116,387	)		—			(144,661	)
Provision for loans receivable		—			(160,932	)		—			(302,243	)		—			(463,175	)
Credit losses for quality assurance commitment		—			—			—			(2,007,968	)		—			(2,007,968	)
Total operating expenses		(20,720	)		(930,250	)		(44,776	)		(5,566,376	)		1,306,568			(5,255,554	)
Income (loss) from subsidiaries(2)		1,991,262			1,395,376			671,331			(2,372	)		(4,055,597	)		—
Income of the consolidated variable interest entities		—			—			1,364,800			—			(1,364,800	)		—
Income from operations		1,970,542			2,097,178			2,076,540			1,583,670			(5,420,397	)		2,307,533
Other income, net		2,158			13,162			319			100,830			—			116,469
Profit before income tax expenses		1,972,700			2,110,340			2,076,859			1,684,500			(5,420,397	)		2,424,002
Income tax expenses		—			(125,569	)		(10,152	)		(319,700	)		—			(455,421	)
Net profit		1,972,700			1,984,771			2,066,707			1,364,800			(5,420,397	)		1,968,581
Net loss attributable to non-controlling interest shareholders		—			6,491			—			—			(2,372	)		4,119
Net profit attributable to FinVolution Group’s ordinary shareholders		1,972,700			1,991,262			2,066,707			1,364,800			(5,422,769	)		1,972,700

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Condensed Consolidating Balance Sheets Information

	As of December 31, 2022
	FinVolution Group		Company Subsidiaries		Primary Beneficiary of Consolidated Variable Interest Entities		Consolidated Variable Interest Entities and Their Subsidiaries		Eliminations			Consolidated Total
	(RMB in thousands)
Cash and cash equivalents		21,990		1,757,304		7,070		1,850,016		—			3,636,380
Restricted cash		—		169,897		—		2,672,810		—			2,842,707
Short-term investments		48,752		680,948		—		2,697,320		—			3,427,020
Accounts receivable and contract assets		—		644,100		—		1,573,345		—			2,217,445
Quality assurance receivable		—		124,894		—		1,544,961		—			1,669,855
Property, equipment and software, net		—		114,431		—		26,914		—			141,345
Intangible assets		—		63,505		—		35,187		—			98,692
Loans and receivables, net of credit loss allowance for loans receivables		—		694,219		—		1,442,213		—			2,136,432
Investments		—		138,137		—		945,947		—			1,084,084
Investment in subsidiaries(3)		13,049,302		5,930,934		7,827,297		73,853		(26,881,386	)		—
Net assets of the consolidated variable interest entities		—		—		5,482,793		—		(5,482,793	)		—
Deferred tax assets		—		130,496		—		788,865		—			919,361
Prepaid expenses and other assets		13,582		102,632		147,859		2,702,678		—			2,966,751
Amounts due from Group companies(4)		641,549		6,932,627		600,313		2,316,737		(10,491,226	)		—
Right of use assets		—		3,212		—		189,216		—			192,428
Goodwill(9)		—		50,411		—		—		—			50,411
Total assets		13,775,175		17,537,747		14,065,332		18,860,062		(42,855,405	)		21,382,911
Deferred guarantee income		—		81,964		—		1,723,200		—			1,805,164
Liability from quality assurance commitment		—		315,783		—		3,239,835		—			3,555,618
Payroll and welfare payable		—		113,207		3,246		157,955		—			274,408
Taxes payable		—		82,453		—		51,574		—			134,027
Funds payable to investors of consolidated trusts		—		—		—		1,845,210		—			1,845,210
Contract liability		—		—		—		5,109		—			5,109
Amounts due to Group companies(4)		1,400,183		3,638,208		303,770		5,149,065		(10,491,226	)		—
Amounts due to related party		—		—		—		1,000		—			1,000
Deferred tax liabilities		—		91,976		—		140,212		—			232,188
Accrued expenses and other liabilities		3,291		15,285		85		890,047		—			908,708
Leasing liabilities		—		2,928		—		174,062		—			176,990
Total liabilities		1,403,474		4,341,804		307,101		13,377,269		(10,491,226	)		8,938,422
Total FinVolution Group shareholders’ equity(3)		12,371,701		13,049,302		13,758,231		5,482,793		(32,290,326	)		12,371,701
Non-controlling interest		—		146,641		—		—		(73,853	)		72,788
Total shareholders’ equity		12,371,701		13,195,943		13,758,231		5,482,793		(32,364,179	)		12,444,489
Total liabilities and shareholders’ equity		13,775,175		17,537,747		14,065,332		18,860,062		(42,855,405	)		21,382,911

17

Condensed Consolidating Balance Sheets Information

	As of December 31, 2021
	FinVolution Group		Company Subsidiaries		Primary Beneficiary of Consolidated Variable Interest Entities		Consolidated Variable Interest Entities and Their Subsidiaries		Eliminations			Consolidated Total
	(RMB in thousands)
Cash and cash equivalents		38,231		2,199,438		3,877		2,176,581		—			4,418,127
Restricted cash		—		381,582		—		3,691,832		—			4,073,414
Short-term investments		—		31,378		—		1,173,523		—			1,204,901
Accounts receivable and contract assets		—		85,767		—		1,805,079		—			1,890,846
Quality assurance receivable		—		—		—		931,798		—			931,798
Property, equipment and software, net		—		69,156		—		43,241		—			112,397
Intangible assets		—		63,760		—		35,187		—			98,947
Loans and receivables, net of credit loss allowance for loans receivables		—		285,781		—		1,696,495		—			1,982,276
Investments		—		150,510		—		820,607		—			971,117
Investment in subsidiaries (3)		10,574,557		6,108,415		4,324,128		70,578		(21,077,678	)		—
Net assets of the consolidated variable interest entities		—		—		5,659,944		—		(5,659,944	)		—
Deferred tax assets		—		112,247		—		343,494		—			455,741
Prepaid expenses and other assets		2,795		220,173		3,816		1,672,654		—			1,899,438
Amounts due from Group companies(4)		694,123		3,534,245		744,700		2,200,275		(7,173,343	)		—
Right of use assets		—		197		—		48,941		—			49,138
Goodwill(9)		—		50,411		—		—		—			50,411
Total assets		11,309,706		13,293,060		10,736,465		16,710,285		(33,910,965	)		18,138,551
Deferred guarantee income		—		—		—		1,089,503		—			1,089,503
Liability from quality assurance commitment		—		—		—		3,188,561		—			3,188,561
Payroll and welfare payable		—		102,032		4,189		146,697		—			252,918
Taxes payable		—		143,411		—		57,237		—			200,648
Funds payable to investors of consolidated trusts		—		—		—		1,795,640		—			1,795,640
Contract liability		1,610		—		—		6,826		—			8,436
Amounts due to Group companies(4)		647,199		2,221,430		299,662		4,005,052		(7,173,343	)		—
Amounts due to related party		—		—		—		2,265		—			2,265
Deferred tax liabilities		—		91,976		—		45,656		—			137,632
Accrued expenses and other liabilities		5,647		34,544		71		679,720		—			719,982
Leasing liabilities		—		172		—		33,184		—			33,356
Total liabilities		654,456		2,593,565		303,922		11,050,341		(7,173,343	)		7,428,941
Total FinVolution Group shareholders’ equity(3)		10,655,250		10,574,557		10,432,543		5,659,944		(26,667,044	)		10,655,250
Non-controlling interest		—		124,938		—		—		(70,578	)		54,360
Total shareholders’ equity		10,655,250		10,699,495		10,432,543		5,659,944		(26,737,622	)		10,709,610
Total liabilities and shareholders’ equity		11,309,706		13,293,060		10,736,465		16,710,285		(33,910,965	)		18,138,551

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Condensed Consolidating Cash Flows Information

	For the Year Ended December 31, 2022
	FinVolution Group			Company Subsidiaries			Primary Beneficiary of Consolidated Variable Interest Entities			Consolidated Variable Interest Entities and Their Subsidiaries			Eliminations			Consolidated Total
	(RMB in thousands)
Cash used in operating activities under service agreements for Intercompany(5)		—			(649,653	)		(1,098	)		(3,598,761	)		4,249,512			—
Cash provided by operating activities under service agreements for Intercompany(5)		—			3,587,081			11,680			650,751			(4,249,512	)		—
Net cash provided by (used in) operating activities for Third-party		(36,357	)		(834,710	)		(158,727	)		1,298,627			—			268,833
Net cash provided by (used in) operating activities		(36,357	)		2,102,718			(148,145	)		(1,649,383	)		—			268,833
Capital contribution to Group companies(6)		—			—			—			(10,020	)		10,020			—
Collection of loans from Group companies(7)		455,144			161,047			237,169			72,373			(925,733	)		—
Cash paid as loans extended to Group companies(8)		(402,570	)		(3,849,985	)		(90,031	)		(304,533	)		4,647,119			—
Other investing activities		(48,275	)		(748,571	)		—			(756,382	)		—			(1,553,228	)
Net cash provided by (used in) investing activities		4,299			(4,437,509	)		147,138			(998,562	)		3,731,406			(1,553,228	)
Capital contribution from Group companies(6)		—			10,020			—			—			(10,020	)		—
Repayment of loans to Group companies(7)		(487,333	)		(231,720	)		(72,373	)		(134,307	)		925,733			—
Cash received as loans from Group companies(8)		1,240,317			1,796,828			76,573			1,533,401			(4,647,119	)		—
Other financing activities		(702,674	)		3,554			—			(96,736	)		—			(795,856	)
Net cash (provided by) used in financing activities		50,310			1,578,682			4,200			1,302,358			(3,731,406	)		(795,856	)

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Condensed Consolidating Cash Flows Information

	For the Year Ended December 31, 2021
	FinVolution Group			Company Subsidiaries			Primary Beneficiary of Consolidated Variable Interest Entities			Consolidated Variable Interest Entities and Their Subsidiaries			Eliminations			Consolidated Total
	(RMB in thousands)
Cash used in operating activities under service agreements for Intercompany(5)		—			(534,943	)		(45	)		(2,313,224	)		2,848,212			—
Cash provided by operating activities under service agreements for Intercompany(5)		—			2,290,805			22,419			534,988			(2,848,212	)		—
Net cash provided by (used in) operating activities for Third-party		(45,587	)		(716,930	)		(19,691	)		1,412,435			—			630,227
Net cash provided by (used in) operating activities		(45,587	)		1,038,932			2,683			(365,801	)		—			630,227
Capital contribution to Group companies(6)		—			—			—			(22,432	)		22,432			—
Collection of loans from Group companies(7)		846,737			186,283			256,537			389,043			(1,678,600	)		—
Cash paid as loans extended to Group companies(8)		(238,254	)		(2,296,392	)		(92,801	)		(2,328,235	)		4,955,682			—
Other investing activities		—			326,328			—			1,668,517			—			1,994,845
Net cash provided by (used in) investing activities		608,483			(1,783,781	)		163,736			(293,107	)		3,299,514			1,994,845
Capital contribution from Group companies(6)		—			22,432			—			—			(22,432	)		—
Repayment of loans to Group companies(7)		(839,719	)		(285,119	)		(389,043	)		(164,719	)		1,678,600			—
Cash received as loans from Group companies(8)		603,955			2,341,182			225,307			1,785,238			(4,955,682	)		—
Other financing activities		(310,221	)		967			—			69,454			—			(239,800	)
Net cash (provided by) used in financing activities		(545,985	)		2,079,462			(163,736	)		1,689,973			(3,299,514	)		(239,800	)

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Condensed Consolidating Cash Flows Information

	For the Year Ended December 31, 2020
	FinVolution Group			Company Subsidiaries			Primary Beneficiary of Consolidated Variable Interest Entities			Consolidated Variable Interest Entities and Their Subsidiaries			Eliminations			Consolidated Total
	(RMB in thousands)
Cash used in operating activities under service agreements for Intercompany(5)		—			(101,577	)		(36,047	)		(2,143,205	)		2,280,829			—
Cash provided by operating activities under service agreements for Intercompany(5)		—			2,088,211			54,994			137,624			(2,280,829	)		—
Net cash provided by (used in) operating activities for Third-party		(6,282	)		(105,519	)		(96,939	)		2,415,649			—			2,206,909
Net cash provided by (used in) operating activities		(6,282	)		1,881,115			(77,992	)		410,068			—			2,206,909
Collection of loans from Group companies(7)		557,936			—			—			—			(557,936	)		—
Other investing activities		—			(263,706	)		36,545			1,268,657			—			1,041,496
Net cash provided by (used in) investing activities		557,936			(263,706	)		36,545			1,268,657			(557,936	)		1,041,496
Repayment of loans to Group companies(7)		—			(557,936	)		—			—			557,936			—
Other financing activities		(636,936	)		(167,381	)		—			(2,286,962	)		—			(3,091,279	)
Net cash provided by (used in) financing activities		(636,936	)		(725,317	)		—			(2,286,962	)		557,936			(3,091,279	)

Notes:

(1) Represents the intercompany services eliminated at the consolidation level, including technical development services and technical support services.

(2) Represents the elimination of the income from investment among FinVolution Group, equity subsidiaries, and primary beneficiary of consolidated variable interest entities.

(3) Represents the elimination of the investment among FinVolution Group, equity subsidiaries, and primary beneficiary of consolidated variable interest entities.

(4) Represents the elimination of intercompany balances among FinVolution Group, equity subsidiaries, primary beneficiary of consolidated variable interest entities, consolidated variable interest entities and consolidated variable interest entities’ subsidiaries.

(5) Represents the cash received and cash paid for intercompany services, including technical development services and technical support services.

(6) Capital contribution at intercompany level.

(7) Collection of loans from group companies, and repayment of loans to group companies.

(8) Cash paid as loans extended to group companies, and cash received as loans from group companies.

(9) In October 2017, one equity subsidiary and one consolidated variable interest entity’s subsidiary of FinVolution Group entered into a series of share purchase agreements with shareholders of HB micro lending company (“HB”). After the transactions, the Group was able to control HB. Goodwill and non-controlling interest were recognized in accordance with Accounting Standards Codification (“ASC”) 805 “Business Combinations.” In this consolidated variable interest entity’s consolidating schedule, HB’s financial information was recorded in the Equity Subsidiaries. The Group applied equity method in accounting for the investment of consolidated variable interest entity’s subsidiary in HB due to it can exercise significant influence but does not have control. Total assets for HB were RMB256,390 and RMB300,193 as of December 31, 2021 and 2022. Total liabilities for HB were RMB92,145 and RMB128,115 as of December 31, 2021 and 2022.

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Summary of Risk Factors

Investing in our ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our ADSs. Below please find a summary of the principal risks we face, organized under relevant headings. All the operational risks associated with being based in and having operations in China also apply to our operations in Hong Kong. With respect to the legal risks associated with being based in and having operations in China, the laws, regulations and the discretion of the governmental authorities in China discussed in this annual report are expected to apply to entities and businesses in China, rather than entities or businesses in Hong Kong, which operate under a different set of laws from China.

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.

• We have modified our business model and practices in the past as a result of changes in laws, regulations, policies, measures and guidance. We may further change our business model or practices in the future, which may not be successful ultimately.

• The laws and regulations governing online consumer finance 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.

• 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.

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

• We collaborate with third-party trust management companies to set up trusts with other investors to provide 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.

• 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.

• 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.

• Any failure to comply with existing or future laws and regulations related to data protection, data security, cybersecurity or personal information protection could lead to liabilities, administrative penalties or other regulatory actions, which could negatively affect our operating results and business.

• If our ability to collect delinquent loans is impaired, our business and results of operations might be materially and adversely affected.

• Cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions of us or of a third party could result in disclosure or misuse of confidential information and misappropriation of funds of our borrowers and institutional funding partners, subject us to liabilities, cause reputational harm and adversely impact our results of operations and financial condition.

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Risks Related to Our Corporate Structure

• We are a Cayman Islands holding company with no equity ownership in the consolidated variable interest entities and we conduct operations in China primarily through (i) our subsidiaries in China, (ii) the consolidated variable interest entities with which we have maintained contractual arrangements, and (iii) the subsidiaries of the consolidated variable interest entities. Holders of our ADSs hold equity interest in FinVolution Group, our Cayman Islands holding company, and do not have direct or indirect equity interest in the consolidated variable interest entities and their subsidiaries. If the PRC government finds that the agreements that establish the structure for operating our business do not comply with PRC laws and regulations, or if these regulations or their interpretations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company, our PRC subsidiaries, the consolidated variable interest entities and their respective subsidiaries, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the consolidated variable interest entities and, consequently, significantly affect the financial performance of the consolidated variable interest entities and our company as a whole.

• If the PRC government deems that the contractual arrangements in relation to the consolidated variable interest entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

• We rely on contractual arrangements with the consolidated variable interest entities for a significant portion of our business operations, and such contractual arrangements may not be as effective as equity ownership in providing operational control.

• Any failure by the consolidated variable interest entities, shareholders of the consolidated variable interest entities or other parties to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.

• The shareholders of the consolidated variable interest entities may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

Risks Related to Doing Business in China

• Most of our operations are located in China. Accordingly, our business, prospects, financial conditions and results of operations may be affected to a significant degree by political, economic and social conditions in China generally. In addition, a severe or prolonged downturn in the Chinese or global economy could reduce the demand for consumer loans and investments, which could materially and adversely affect our business and financial condition. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations” and “—A severe or prolonged downturn in the Chinese or global economy could reduce the demand for consumer loans and investments, which could materially and adversely affect our business and financial condition.”

• We face risks arising from uncertainties with respect to the PRC legal system. Certain rules and regulations can change quickly and sometimes on short notice, and there may be risks and uncertainties regarding the interpretation and enforcement of PRC laws and regulations. These risks and uncertainties may make it difficult for us to meet or comply with requirements under the applicable laws and regulations. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us.”

• The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating to the internet industry have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet businesses in China, including our business. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.”

• The PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations in this nature may cause the value of such securities to significantly decline. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs.”

23

• Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or fully investigate auditors located in China. The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. For more details, see “tem 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections” and “—Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.”

Risks Related to Our American Depositary Shares

• The market price for our ADSs may be volatile.

• We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, a majority of our directors and executive officers reside within China, and most of the assets of these persons are located within China. As a result, it may be difficult or impossible for you to effect service of process within the United States upon these individuals, or to bring an action against us or against these individuals in the United States in the event that you believe your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC may render you unable to enforce a judgment against our assets or the assets of our directors and officers. See “Item 3. Key Information—D. Risk Factors—Risks Related to our ADSs—You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law” and “—Certain judgments obtained against us by our shareholders may not be enforceable.”

A. [Reserved]

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Investing in our ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our ADSs. Below please find the principal risks we face, organized under relevant headings. In the event that PRC regulations become applicable to companies in Hong Kong, the legal and operational risks associated with operating in China, as discussed in “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry,” may also apply to our operations in Hong Kong. These risks are discussed more fully in the section titled “Item 3. Key Information—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 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 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.

24

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 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 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 have modified our business model and practices in the past as a result of changes in laws, regulations, policies, measures and guidance. We may further change our business model or practices in the future, which may not be successful ultimately.

Given the complexities, uncertainties and frequent changes in PRC laws, rules, regulations, policies and measures, including changes in their interpretation and implementation, we have historically modified our business models and practices due to shifts in regulatory requirements and our strategies. For example, we had ceased facilitating new loans with funding from individual investors on our platform since October 2019 and improved our business model through acquisition of better quality borrowers and transition of our funding sources from individual investors to institutional funding partners. On January 14, 2022, the Shanghai Financial Stability Coordinating Joint Conference Office, the Shanghai Online Lending Risk Rectification Office and other regulatory authorities jointly announced that Shanghai PPDai, among others, had declared the termination of its business operation as an online lending information intermediary and fully settled all related legacy loan products funded by individual investors. In connection with this change of business model and practices, our business operations have gone through considerable changes, such as offering new products and services, adjusting our business process and model, hiring new employees and building up new departments, and collaborating with new business partners.

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We may further change our business model or practices in the future. If this happens, our business operations may have to go through considerable changes and we may experience a loss of continuity, loss of accumulated knowledge or loss of efficiency during the transitional period, which may cause our competitive position, business, financial condition and results of operations to be materially and adversely affected.

The laws and regulations governing online consumer finance 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.

We started our business as an online lending information intermediary. 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, defined online lending information intermediaries as financial information intermediary companies that facilitate loans online between persons, including individual, companies and other organizations. The Interim Measures further introduced a record-filing and licensing regime and provided general obligations and certain prohibited activities of the online lending information intermediaries. 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 Interim Measures.

Due to changes of laws and regulations governing online consumer finance, we have ceased facilitating new loans with funding from individual investors on our platform since October 2019 and improve our business model through acquisition of better quality borrowers and transition of our funding sources from individual investors to institutional funding partners. On January 14, 2022, the Shanghai Financial Stability Coordinating Joint Conference Office, the Shanghai Online Lending Risk Rectification Office and other regulatory authorities jointly announced that Shanghai PPDai, among others, had declared the termination of its business operation as an online lending information intermediary and fully settled all related legacy loan products funded by individual investors.

In addition, on January 21, 2013, the State Council promulgated the Stipulations for Regulating Credit Reference, which provides that any person or organization that conducts personal credit reference business without approval of the competent credit reference administrative department of the State Council may be subject to penalties, including cessation of business operations, confiscation of illegal gains, imposing fines from RMB50,000 to RMB500,000, and even criminal liability. On September 27, 2021, the PBOC issued the Measures for Regulating Credit Reference, which came into effect on January 1, 2022 and stipulates that, among others (i) the credit information refers to the following information that should be legally collected and used for financial activities: basic information, loan information, other relevant information and analysis and evaluation information generated from the foregoing information of enterprises and individuals for identifying their credit status; and the credit reference business refers to the activities of collecting, sorting, storing and processing the credit information of enterprises and individuals, and providing them to the information users; (ii) a license for individual credit reference business issued by the PBOC is required for engaging in the individual credit reference business, and the licensed credit reference agency shall report to the PBOC with respect to its cooperation with any information provider for collecting, sorting, storing and analyzing individual credit information; (iii) the financial institutions are not allowed to cooperate with any commercial entity that does not hold a credit reference license to obtain credit reference service; and (iv) any persons that engage in the individual credit reference business without a license for individual credit reference business will be given an 18-month grace period starting from January 1, 2022 to complete the necessary compliance rectification.

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It is reported that in July 2021, the Credit Information System Bureau of PBOC notified several internet platforms to complete “disconnecting direct connection” process between personal information and financial institutions, which implied that as an online consumer finance marketplace, we may be prohibited from providing personal information directly to institutional funding partners. Currently, we provide borrower referral and preliminary credit assessment services to our institutional funding partners, and the information shared by us with such institutional funding partners with due authorization may be deemed as the credit information. As of the date of this annual report, we have not received the notice relating to “disconnecting direct connection” from the regulatory authorities. If the preliminary credit assessment services provided by us to our institutional funding partners would be deemed by the regulatory authorities as the credit reference business, or direct connection between personal information and financial institutions, we may be required make adjustment to our business operations to comply with the regulatory requirements, for instance, to obtain a license for individual credit reference business from the competent regulatory authorities or change our business model, pursue cooperation with the licensed credit reference agencies and filing of the relevant cooperation agreement with the PBOC or its provincial branches. If we cannot obtain the regulatory approval or find licensed credit reference agencies to cooperate with or complete the cooperation agreement filing in a timely manner, we may be deemed as violating the applicable laws and regulations of credit reference services, which may subject us to penalties, including cessation of business operations, confiscation of illegal gains, imposing fines from RMB50,000 to RMB500,000, and even criminal liability. As of the date of this annual report, we have completed the majority of our preparation work and we are still testing the rectification measures as we deem appropriate to ensure compliance with the regulatory requirements of “disconnecting direct connection” between personal information and our institutional funding partners. We may not be able to complete the compliance rectification within the 18-month grace period beginning on January 1, 2022. Even if we complete the rectification within such grace period, we cannot assure you that our rectifications will be deemed to be in full compliance with the applicable laws and regulations relating to “disconnecting direct connection.” If we fail to satisfy the regulatory authorities’ requirements, we may be required to further modify our business model, terminate certain practices that may be deemed as non-compliance, or even terminate our business operation, which may materially and adversely affect our business, financial condition and results of operations. As of the date of this annual report, we have not been subject to any penalties from the PBOC or any of its branches related to our cooperation with the institutional funding partners. Our origination, servicing expenses and other cost of revenue may increase or we may change our current business model if we start to cooperate with licensed credit reference agencies, which may affect our financial performance and results of operations. Furthermore, we rely on certain data partners to collect credit information of borrowers for credit scoring and fraud detections. If these data partners’ business is deemed as credit reference and they are unable to obtain the regulatory approval or complete the filing, we cannot assure you that we will be able to find an alternative in a timely and cost-efficient manner, or at all. Any of these occurrences could result in reputational damage, regulatory intervention and diminished ability to operate our business, which could adversely impact our business, financial condition and results of operations.

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.

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.

In 2020, 2021 and 2022, the loan origination volume funded by institutional funding partners on our platform was RMB65.1 billion, RMB137.4 billion and RMB175.4 billion (US$25.4 billion), representing 100.0%, 100.0% and 100.0% of our total loan origination volume in the same year. 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 Erxu, a subsidiary of one of the consolidated variable interest entities, Shanghai Zihe. Shanghai Erxu primarily provides services to our institutional funding partners, such as borrower referral and preliminary credit assessment, and facilitate their participation in our online lending business.

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The online consumer finance industry in which we operate is new and evolving. The regulatory authorities’ final interpretation of the applicable laws in the online consumer finance industry remains lacking. There exists uncertainties on whether the business practice of Shanghai Erxu will be deemed to be in full compliance with all applicable laws and regulations. For example, if the preliminary credit assessment services provided by Shanghai Erxu to our institutional funding partners are deemed by the regulatory authorities as the credit reference business or direct connection between personal information and financial institutions, Shanghai Erxu may be required to obtain a license for individual credit reference business, or alternatively, pursue cooperation with licensed credit reference agencies and submit the relevant cooperation agreement with the PBOC or its provincial branches. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—The laws and regulations governing online consumer finance 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.” 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 Erxu has 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 Erxu 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, the institutional funding partners shall comply with the regulations relating to personal loans, which is still evolving. On February 12, 2010, the CBRC promulgated the Interim Measures on Administration of Personal Loans, or the Personal Loan Interim Measures, which provide that (i) several conditions shall be satisfied to apply for a personal loan, including but not limited to (a) the purposes of the loan shall be clear and legal, (b) the amount, term and currency of the loan as indicated in the loan application shall be reasonable, and (c) the borrower is willing and able to make repayment, and the borrower shall have a good credit standing and no record of bad credit, (ii) loan investigation shall cover, including but not limited to, the basic information of the borrower, the borrower’s earnings, the purpose of the loan, and the borrower’s source of funds and ability for repayment, and the method of repayment, and (iii) the lender shall perform the loan investigation on the borrower by itself and shall not delegate such matter to a third party. On January 6, 2023, the CBIRC issued the Draft Measures on Administration of Personal Loans for public comments, which will replace the Personal Loan Interim Measures once effective. This draft further stipulates that during the loan investigation process, the lender shall not delegate the core risk management matters such as the assessment of the genuine intention of the borrower, the borrower’s earnings, indebtedness, source of funds, and the assessment of the entry of evaluation service provider, to a third party.

Furthermore, on July 12, 2020, the China Banking and Insurance Regulatory Commission, or the CBIRC, promulgated 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, third-party payment companies and information technology 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, when collaborating with third parties for online lending businesses, the banks are required to independently manage core risk control procedures, such as the credit assessment and contract conclusion, and should be responsible for post-loan managements. 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 provide 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 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. The banks should evaluate and review the online lending partners they collaborate with at least once a year and terminate the cooperation if any incompetency is identified.

On February 19, 2021, the CBIRC further issued the Notice of Further Regulating Online Loan Business of Commercial Banks, also known as Circular 24, which provides that the commercial banks shall independently carry out the risk management of online loans and are forbidden from outsourcing the material procedures of loan management. The outstanding balance of online loans extended by a bank in collaboration with third-party platforms should not exceed 50% of the bank’s total outstanding balance. Where a commercial bank and its joint lending partner jointly contribute funds to issue online loans, the funding contribution percentage of its joint lending partner shall not be less than 30%. Circular 24 further strengthens the requirement that commercial banks are strictly prohibited from outsourcing the material procedures of loan management, and local commercial banks from engaging in an online loan business outside the territory of their registered place. The requirements on the limit of 30% for the joint lending loans and the cross-regional prohibition came into effect on January 1, 2022. The non-conforming legacy loans that extended before the promulgation of Circular 24 may be settled on their relative maturity dates.

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On July 15, 2022, the CBIRC issued the Notice on Strengthening the Management of Commercial Banks’ Online Lending Business and Improving the Quality and Efficiency of Financial Services (the “Circular 14”), which further requires commercial banks to: (i) take necessary measures to effectively assess the compliance system, supervision mechanism, information processing guidance, and security protection measures of personal information protection of the institutes they cooperate with, (ii) strengthen loan fund management, take effective measures to monitor loan usage, ensure safety of the loan funds, and prevent institutions they cooperate with from intercepting, pooling, or misappropriating funds, (iii) standardize the online loan cooperation business with third-party institutions, and restrict or refuse to cooperate with those that are in violation of relevant regulations on online loans, and (iv) strengthen the protection of consumer rights and interests, the compliance management of the marketing and promotion activities of the institutions they cooperate with, and clearly stipulate the relevant prohibited behaviors in their cooperation agreement with the institutions. With respect to the current non-compliance business, the commercial banks will be given a grace period through June 30, 2023 to rectify the non-compliance. During the grace period, the commercial banks shall comply with the requirements under the Interim Measures for Banks, Circular 24, and Circular 14 when conducting any new online loans businesses.

With certain limited exceptions, the Interim Measures for Banks, Circular 24, and Circular 14 apply to the consumer finance companies and trust companies when they conduct online lending business. As our institutional funding partners include commercial banks, consumer finance companies and trust companies, they are required to evaluate and review us as required by the Interim Measures for Banks, Circular 24, and Circular 14. If any of our institutional funding partners identifies any incompetency of us in such evaluation and review, it may terminate the cooperation with us and our business and operation results would be adversely and materially affected. Furthermore, we act as an intermediary between institutional funding partners and borrowers, and we cannot assure you that all the institutional funding partners we cooperate with have been and will be in strict compliance with the Interim Measures for Banks, Circular 24 and Circular 14.

On December 31, 2021, the PBOC, the CBIRC and five other regulatory authorities jointly published the Administrative Measures for Online Offering of Financial Products (Draft for Comments), or the Draft Offering Measures, which stipulates that, among others, (i) except otherwise explicitly stipulated by the laws or regulations, a financial institution cannot authorize other organizations to offer its financial products; (ii) without approval from the competent financial regulatory authorities, any third-party internet platform cannot get involved, or get involved in a disguised form, in the online offering of financial products, including but not limited to, procedures of interactive consultant with the consumer, know-your-customer, sales contract conclusion, or fund transferring. The third-party internet platform cannot participate, or participate in a disguised form, in sharing the revenue generated from the financial business; (iii) the third-party internet platform cannot illegally crack, hold, nor store customer information and business data; (iv) the “online offering” is defined as commercial promotion and recommendation activities of the financial products on the internet platform, including but not limited to exhibiting the financial product information and the financial institution’s brand name or logo, providing sales channel for consumers to purchase financial products. The “financial products” includes deposit products, loan products, asset management products, etc. that are designed, developed, or sold by financial institutions; and (v) a transition period of 6 months would be given to the existing non-compliance activities before the effectiveness of the draft. As uncertainties remain regarding when the Draft Offering Measures would be adopted and become effective, and to what extent we would be subject to the Draft Offering Measures, we cannot assure you that we will be able to comply with such regulations in all respects in a timely manner, or at all, and we may be ordered to rectify or terminate any actions that are deemed illegal by regulatory authorities. If we cannot rectify our business model in a timely manner, or at all, the regulatory authorities may levy fines, confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business. Any of these actions by the PRC government may have a material adverse effect on our business and results of operations.

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

Pursuant to the Notice on Regulating and Rectifying “Cash Loan” Business issued jointly by the National Internet Finance Rectification Office and the National Online Lending Rectification Office in December 2017, or the 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 CBIRC, 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.

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 provide loans to such borrowers and, if yes, the maximum amount of credit available for such borrowers.

We have engaged licensed third-party financing guarantee companies to provide financing guarantees to a 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. In some cases, 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 as an operation of financing guarantee business without approval. If relevant government authorities take the view that the quality assurance commitments we provided to our institutional funding partners is a provision of financing guarantee business 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 cooperation with third-party guarantee companies, and our liquidity, business, financial condition and results of operations will be materially and adversely affected.

We have incorporated three financing guarantee subsidiaries, Fujian Zhiyun Financing Guarantee Company, or Fujian Zhiyun, Zhiyun (Tianjin) Financing Guarantee Company, or Tianjin Zhiyun, and Hainan Shenxin Financing Guarantee Company, or Hainan Shenxin, in 2019 and 2020. In some cases, one of our own financing guarantee subsidiaries 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, 2023, the net assets of Fujian Zhiyun, Tianjin Zhiyun and Hainan Shenxin were RMB1.4 billion (US$203.0 million), RMB778.2 million (US$112.8 million) and RMB260.9 million (US$37.8 million), respectively. It is obvious that the maximum amount of outstanding guarantee liabilities that can be provided by our own guarantee companies 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.

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On December 31, 2021, the PBOC published the Regulations on the Local Financial Supervision and Administration (Draft for Comments), or the Draft Local Financial Regulation, which stipulates that, among others, (i) the local financial organizations should primarily serve their local clients; (ii) the guidance for local financial organizations to carry out business outside provinces where they are registered should be made by the State Council or financial regulatory authorities designated by the State Council; (iii) six types of financial organizations, including financing guarantee companies and micro-lending companies, are deemed as local financial organizations; (iv) transition period will be given to the organizations carrying out business outside provinces before the effectiveness of the draft by the relevant financial regulatory authorities; and (v) organization carrying out business outside provinces without approval of the competent provincial regulatory authorities may be subject to penalties, including correction orders, confiscation of illegal gains or fines, cessation of business operations, and revocation of business license. Currently both the third-party guarantee companies engaged by us and our own guarantee companies provide services to the borrowers nationwide. As uncertainties remain regarding when the Draft Local Financial Regulation would be adopted and become effective, and to what extent we would be subject to the Draft Local Financial Regulation, we cannot assure you that we will be able to comply with such regulations in all respects in a timely manner, or at all, and we may be ordered to rectify or terminate any actions that are deemed illegal by regulatory authorities.

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.

We collaborate with third-party trust management companies to set up trusts with other investors to provide 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 provide loans to borrowers introduced by us. In some cases, we 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 the People’s Bank of China, or the PBOC. Pursuant to the Measures for Illegal Financial Institutions, providing loans without the approval of PBOC is deemed as illegal financial business operation and the entity providing 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 provide 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 providing 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, or the MPS, 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 providing 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; “providing loans to the unspecified public individuals consistently” refers to providing loans to entities and individuals no less than ten times within two years; and (ii) if the actual annual interest rate of the loans provided 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. There are uncertainties as to the interpretation of the Guidance on Illegal Lending, 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.

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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 loan origination volume on our platform was RMB65.1 billion in 2020, RMB137.4 billion in 2021 and RMB175.4 billion (US$25.4 billion) in 2022. To maintain the growth momentum of our platform, we must continuously increase the volume of loans by retaining current participants and attracting more users whose financing 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 through Weixin official account. 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.

We had ceased facilitating new loans with funding from the individual investors on our platform since October 2019 and improved our business model through acquisition of better quality borrowers and transition of our funding sources from individual investors to institutional funding partners. Currently, our institutional funding partners primarily include commercial banks, private banks, consumer finance companies, micro-loan companies and trust management companies. Historically, a small portion of the loans on our platform were funded by some third-party online lending information intermediaries. Considering the regulatory uncertainties faced by third-party online lending information intermediaries, we have ceased facilitating new loans for third-party online lending information intermediaries since November 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, 2022, we had cumulatively cooperated with 75 institutional funding partners in China. The loans funded by the institutional funding partners typically have fixed terms from three 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.

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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 institutional funding partners. 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 institutional funding partners 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;

• 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 international expansion may expose us to additional risks.

Our business currently primarily focuses on the PRC market. We are currently also expanding our business in the overseas market. In December 2018 and June 2019, we established two subsidiaries in the Philippines, and one of them is authorized to operate as a lending company and the other is authorized to operate as a financing company. In December 2019, we established a subsidiary in Indonesia, which has received a license for Technology and Information Based Financial Lending Institution (peer-to-peer lending license) from the Financial Services Authority of Indonesia. There can be no assurance that our international expansion will be successful, as there are inherent risks and challenges in operating overseas businesses, including:

• business licensing or certification requirements of the local markets;

• the need for increased resources to manage regulatory compliance across our overseas businesses;

• challenges of localizing our services and products to meet the local needs;

• failure to effectively or efficiently locate and cooperate with local business partners;

• failure to attract and retain capable talent with international perspectives who can effectively manage and operate local businesses;

• exchange rate fluctuations; and

• geopolitical tensions.

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Our overseas business operations are also subject to increasing regulatory scrutiny, in particular the areas of data privacy protection, interest rate cap and collection practices, which might adversely affect our business operations. While we strive to comply with all applicable laws and regulations and work closely with the regulatory authorities in the regions that we operate, we have limited experience in these markets and differences in interpretation of relevant laws, regulations, and/or policies. As a result, we may incur substantial compliance costs attributed to compliance costs, such as investigation, caseation of operation and administrative measures and penalties.

Our outstanding loan balance in the overseas markets increased from RMB187 million as of December 31, 2020 to RMB330.0 million as of December 31, 2021 and further to RMB800.4 million (US$116.0 million) as of December 31, 2022. In 2020, 2021 and 2022, revenue generated from the overseas market were RMB269.9 million, RMB826.4 million and RMB1,149.7 million (US$166.7 million), representing 3.6%, 8.7% and 10.3% of net revenues for the respective years. Our current or future international expansion may expose us to additional risks, including general economic and political conditions internationally and the changes of global macroeconomic environment. In addition, 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.

The all-in borrowing cost, including the interest rate and the total expense paid by the borrower for the borrowing, is highly regulated by the Supreme People’s Court and different regulatory authorities. According to the Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases issued by the Supreme People’s Court on August 6, 2015, or the Private Lending Judicial Interpretations, in the context of lending activities between individuals, entities or other organizations that are not licensed financial institutions, (i) if the interest rate of a loan exceeds 36% per annum, the exceeding part of the interest rate is invalid and void, and (ii) 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.

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 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 should be supported by the PRC courts. For loans facilitated at annual rate between 24% and 36% historically or in the future, if any of such loans become delinquent, we will not be able to enforce part of the interest that exceed 24% through PRC judicial system. As a result, our institutional funding partners may suffer losses, which would damage our reputation and harm our business. Were these to happen, our reputation, results of operations and financial condition would be adversely affected.

According to the Notice on Regulating and Rectifying “Cash Loan” Business, or Circular 141, promulgated by the Internet Finance Rectification Office and the Online Lending Rectification Office in December 2017, in the context of “cash loan” business operated by various types of institutions, the aggregated borrowing costs of borrower charged in forms of interests and all kinds of fees should be annualized and subject to the upper limit on interest rate of private lending set forth in the judicial interpretations issued by the Supreme People’s Court. When Circular 141 was promulgated, the then effective upper limit on interest rate of private lending was 24% per annum as judicially protected by the court, while the range of 24% to 36% per annum was deemed as natural obligation and the exceeding part of 36% per annum was deemed as illegal.

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On August 20, 2020, the Supreme People’s Court issued the Decision on Amending the Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases, which is further amended by the Supreme People’s Court on December 29, 2020, or the Private Lending Judicial Interpretation Amendment, which amended the upper limit of private lending interest rates under judicial protection. According to the Private Lending Judicial Interpretation Amendment, the upper limit of interest rate for one-year private loan would be capped at four times that of the loan prime rate at the time of the establishment of the agreement, or the Quadruple LPR Limit. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services—Regulations on lending activities” for more details. The aforementioned one-year loan prime rate refers to the one-year loan market quoted interest rate issued by the National Bank Interbank Funding Center on the 20^th of each month starting from August 20, 2019, and as of the date of this annual report, the most recent one-year loan market quoted interest rate issued by the National Bank Interbank Funding Center was 3.65%. We cannot assure you that the one-year loan market quoted interest rate and the Quadruple LPR Limit will not decrease further in the future.

According to the Private Lending Judicial Interpretation Amendment, (i) in terms of lending activities between individuals, entities or other organizations that are not licensed financial institutions, if the interest rate of a loan exceeds the Quadruple LPR Limit, the exceeding part will not be supported and enforceable in the PRC judicial system; and (ii) the Quadruple LPR Limit does not apply to the disputes arising out of loans funded by financial institutions or its branches which are licensed by financial regulatory authorities.

On January 21, 2021, the Response Letter to the Guangdong High People’s Court Relating to the Inquiry on the Scope of Application of the Private Lending Judicial Interpretation Amendment issued by the Supreme People’s Court, or the Supreme Court’s Response Letter, further clarifies that seven types of financial organizations, including micro-loan lending companies and financing guarantee companies, are deemed as financial institutions licensed by the financial administrative authorities, and any disputes arising out of their financial business activities should not apply to the Private Lending Judicial Interpretation Amendment. However, as the regulatory authorities have wide discretion in administration, interpretation and enforcement of the laws and regulations, we cannot rule out the possibility that the regulatory authorities may hold different opinions on whether Quadruple LPR Limit applies to the loans funded by financial institutions on our platform. In that case, for loans facilitated at or above the Quadruple LPR limit become delinquent, we may not be able to collect parts of the interest that exceed the Quadruple LPR limit through the PRC judicial enforcement. As a result, our institutional funding partners may suffer losses, which would damage our reputation, results of operations and financial condition. According to the Supreme Court’s Response Letter, we believe that the Quadruple LPR Limit stipulated in the Private Lending Judicial Interpretation Amendment does not apply to the financial institutions. However, we cannot assure you that the regulatory authorities share the same view as ours. Currently, substantially all of our institutional funding partners that we cooperate with for funding new loans origination on our platform are financial institutions licensed by financial regulatory authorities.

On March 31, 2021, the PBOC released its No. 3 announcement in 2021, or the PBOC No. 3 Announcement, which stipulates, among others, that the annual interest rate of a loan should be the annualized form of ratio calculated based on the percentage of all expenses charged from the borrower for the borrowing to the principal actually borrowed by this borrower. The expenses charged from the borrower include the interests and the various expenses directly related to the borrowing. If the loan is repaid in installments, the remaining principal after the deduction of the total repaid principal should be deemed as the actual borrowed principal when calculating the annual interest rate. Compound interest rate and simple interest rate are both allowed to be used to calculate the annual interest rate, provided that if simple interest rate is used, it should be explicitly disclosed to the borrower. The PBOC No. 3 Announcement applies to deposit-taking financial institutions, consumer finance companies, micro-loan lending company, and internet platforms providing loan application services like us. It is our view that the implementation of PBOC No. 3 Announcement is not retrospective.

We have certain loans facilitated on our platform with an interest rate over 24% per annum. Before the promulgation of PBOC No. 3 Announcement, no rules or regulations explicitly defined the calculation method for the maximum interest rates permitted by the relevant laws. Upon the promulgation of No. 3 Announcement, we have changed our calculation method for the interest rate to the annual all-in borrowing cost as a percentage of the outstanding principal after deducting all installments that have been repaid. We have also explicitly disclosed the calculation method for the interest rate of the loans on our platform to our borrowers. As of December 31, 2022, the outstanding balance of loans facilitated on our platform in China with an interest rate over 24% was RMB8.9 billion (US$1.3 billion), representing 13.9% of the outstanding loan balance as of the same date. These loans had the terms ranging from one month to 24 months. In the event that any of such loans become delinquent, we may not be able to collect the portion of interests that exceed 24% per annum through PRC judicial enforcement. Furthermore, the portion of interest rate that exceeds 24% per annum may be determined to be invalid by the regulatory authorities, and we may have to adjust the interest rate accordingly, which may adversely and materially affect our results of operations and financial condition. Were these to happen, our reputation, results of operations and financial condition would be adversely affected. It is our belief that our calculation for the interest rate is in line with the requirements in the PBOC No. 3 Announcement. However, we cannot assure you that our historical or current calculation method for the interest rate would be deemed to be in full compliance with the PBOC No. 3 Announcement. As the PBOC No. 3 Announcement is relatively new, there still exists great uncertainties with respect to its interpretation and application. We will maintain communication with the relevant authorities and closely monitor its enforcement.

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Our introduction of new products and services may expose us to new challenges and more risks.

We have invested, and intend to continue to invest, significantly in product development. We require our third-party business partners, including but not limited to, institutional funding partners, payment companies, and data partners, to fully comply with all applicable laws and regulations, and the third-party online consumer finance partners should be fully responsible for any of their misconducts. However, as we have very limited control over those third-party business partners, we cannot ensure their operations will be in full compliance with all applicable laws and regulations. If those third-party business partners do not comply with any applicable laws and regulations and the borrowers are dissatisfied with their products displayed on our platform, our reputation and operation results could be adversely affected.

We operate in a market where the credit infrastructure is still at an early stage of development.

China’s credit infrastructure is still at an early stage of development. The Credit Reference Center established by the PBOC in 2002 has been the only credit reporting system in China. This centrally managed nationwide credit database operated by the Credit Reference Center only records limited credit information, such as tax payments, civil lawsuits, foreclosure and bankruptcy. Currently, this credit database is accessible to banks and market players authorized by the Credit Reference Center. In 2015, the PBOC announced that it would open the credit reporting market to private sectors with a view to spurring competition and innovation, but it may be a long-term process to establish a widely-applicable, reliable and sophisticated credit infrastructure in the market we operate. Although some of our licensed subsidiaries, such as our micro-loan company and financial guarantee companies, have been approved by the Credit Reference Center to check or report the borrower’s credit status, the cooperation is still at an early stage. The volume of loans for which we check or report borrower financial status from or to the Credit Reference Center through our licensed subsidiaries is relatively small compared with the loan origination volume on our platform. In most cases, our institutional funding partners decide at their own discretion if to check any borrower’s credit status at the Credit Reference Center as they conduct credit assessment independently. In general, the borrowers on our platform give general authorization to the institutional funding partners to check the borrowers’ credit status from and report the borrowers’ defaults to the Credit Reference Center. We have started data sharing with a credit reference agency licensed by the PBOC to provide individual credit reference service. However, the licensed credit reference agencies in China are newly established companies. Whether it can efficiently aggregate data from all different types of online databases with accuracy remains to be proven.

We are subject to credit cycle and the risk of deterioration of credit profiles of borrowers.

Our business is subject to credit cycle associated with the volatility of general economy. If economic conditions deteriorate, we may face increased risk of default or delinquency of borrowers, which will result in lower returns or losses. In the event that the creditworthiness of our borrowers deteriorates or we cannot track the deterioration of their creditworthiness, the criteria we use for the analysis of borrower credit profiles may be rendered inaccurate, and our risk management system may be subsequently rendered ineffective. This in turn may lead to higher default rates and adverse impacts on our reputation, business, results of operations and financial positions. We cooperate with institutional funding partners through both capital heavy model and capital light model. Under the capital heavy model, we provide credit enhancement services to institutional funding partners through third-party guarantee companies or our financing guarantee subsidiaries. See “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.” As our financing guarantee subsidiaries provide guarantee for certain amount of loans funded by institutional funding partners and the amount of payments payable by us to third-party guarantee companies depends on the amount of default loans, we are subject to credit risks for those loans funded 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 rely on our proprietary credit-scoring model in assessing the creditworthiness of our borrowers and the risks associated with loans. If our credit-scoring model is flawed or ineffective, or if we otherwise fail or are perceived to fail to manage the default risks of loans facilitated through our platform, our reputation and market share would be materially and adversely affected, which would severely impact our business and results of operations.

Our ability to attract borrowers and institutional funding partners to, and build trust in, our platform is significantly dependent on our ability to effectively evaluate borrowers’ credit profiles and likelihood of default. To conduct this evaluation, we utilize our proprietary credit assessment model, or the Magic Mirror Model, which is built based on data from multiple sources, including credit reference agency, and strengthened by our sophisticated artificial intelligence and advanced machine learning techniques. The Magic Mirror Model categorizes borrowers into different credit ratings according to their risk profiles, based on which our risk pricing system assigns them appropriate interest rates, credit limits and loan durations. However, the Magic Mirror Model may not effectively predict future loan losses. Subject to credit assessment result for each loan application, a borrower is allowed to take out multiple loans at a time on our platform if his or her existing loans are not in default and the total outstanding balance is within the approved credit limit for the type of loan the borrower applies for. Credit limits are set by loan products, and thus a borrower may have a credit limit for each type of loans on our platform. A borrower’s credit limit for a particular type of loan is determined considering a range of factors, including (i) the borrower’s credit level based on his or her Magic Mirror score—borrowers with better Magic Mirror credit scores are generally given higher credit limits, (ii) the borrower’s credit needs, such as the type of loans being applied for, (iii) the borrower’s credit limits and credit performance for other types of loans on our platform, and (iv) overall investment demand from investors. A new Magic Mirror credit score is generated each time a borrower applies for a loan, which may change the borrower’s credit limit for that type of loan. As such, it is possible that borrowers may take out new loans on our platform to pay off their other existing loans facilitated by us or for other purposes. Given the practical difficulty in tracking and controlling the usage of borrowed funds, we are not able to effectively prevent borrowers from “rolling over” their loans on our platform. Although the Magic Mirror Model looks less favorably upon borrowers who have high credit line utilization ratios, it may not be able to timely and accurately adjust down the credit rating assigned to a borrower if such borrower masks his or her deteriorating creditworthiness by refinancing existing loans with new loans on our platform. If we are unable to effectively classify borrowers into the relative risk categories, we may be unable to offer attractive interest rates for borrowers and returns for investors and effectively manage the default risks of loans facilitated through our platform. We continuously refine the algorithms, data processing and machine learning used by the Magic Mirror Model, but if any of these decision-making and scoring systems contain programming or other errors, are ineffective or the data provided by borrowers or third parties are incorrect or stale, our loan pricing and approval process could be negatively affected, resulting in mispriced or misclassified loans or incorrect approvals or denials of loans.

For loans funded by our institutional funding partners, the institutional funding partners will review borrowers’ applications and may rely on our preliminary credit assessment we provide to them and then decide if to provide loans to such borrower as well as the credit limit after their independent credit review. If any data provided by borrowers or third parties are incorrect or stale or our preliminary credit assessment service is not effective, our cooperation with institutional funding partners could be negatively affected. In addition, we bear credit risks for a substantial majority of the loans funded by institutional funding partners to borrowers introduced by us. If our ability to provide preliminary credit assessment is not as effective or efficient as expected, our liquidity, financial conditions and results of operations may be materially and adversely affected.

In addition, if a borrower’s financial condition deteriorates after his or her loan application is approved, we may not be able to take measures to prevent such borrower’s default and thereby maintain a reasonably low default rate for loans facilitated through our platform.

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Credit and other information that we receive from prospective borrowers and third parties about a borrower may be inaccurate or may not accurately reflect the borrower’s creditworthiness, which may compromise the accuracy of our credit assessment.

For the purpose of credit assessment, we obtain from prospective borrowers and third parties certain information of the prospective borrowers, which may not be complete, accurate or reliable. A credit score assigned to a borrower may not reflect that particular borrower’s actual creditworthiness because the credit score may be based on outdated, incomplete or inaccurate borrower information. Additionally, once we have obtained a borrower’s information, the borrower may subsequently (i) become delinquent in the payment of an outstanding obligation; (ii) default on a pre-existing debt obligation; (iii) take on additional debt; or (iv) sustain other adverse financial events, making the information we have previously obtained inaccurate. To better assess borrowers creditworthiness, we joined the credit and information sharing system set up by the National Internet Finance Association of China. A participant of this sharing system can obtain a borrower’s credit information shared by other participants. However, this sharing system is still at the primary stage of development and there are a limited number of participants and limited amount information in this sharing system. We have started data sharing with a credit reference agency licensed by the PBOC to provide individual credit reference service. However, the licensed credit reference agencies in China are newly established companies. It remains unclear as to whether the credit reference agency we cooperate with can efficiently and accurately aggregate data from all different types of online databases. As a result, we cannot determine whether borrowers have outstanding loans through other consumer finance marketplaces not participating in this sharing system at the time they obtain a loan from us. This creates the risk that a borrower may borrow money through our platform in order to pay off loans on other consumer finance marketplaces and vice versa. If a borrower incurs additional debt before fully repaying any loan such borrower takes out on our platform, the additional debt may impair the ability of that borrower to make payments on his or her loan and the investor’s ability to receive investment returns associated with such loan. In addition, the additional debt may adversely affect the borrower’s creditworthiness generally, and could result in the financial distress or insolvency of the borrower. To the extent that a borrower has or incurs other indebtedness and cannot repay all of his or her indebtedness, the obligations under the loans will rank pari passu to each other and the borrower may choose to make payments to other creditors rather than to investors on our platform. Furthermore, the Circular 141 provided, among others, that funds from banks cannot be used for “campus loan” business. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services—Regulations on lending activities.” We have adopted several measures to identify college students and try to prevent them borrowing money from our platform. However, we cannot assure that those measures are able to identify all college students on our platform.

Such inaccurate or incomplete borrower information could compromise the accuracy of our credit assessment and adversely affect the effectiveness of our risk management, which could in turn harm our reputation, and as a result our business and results of operations could be materially and adversely affected.

Loss of or failure to maintain relationship with our strategic partners may materially and adversely affect our business and results of operations.

We currently rely on a number of strategic partners in various aspects of our business. For example, in terms of user acquisition, we acquire a significant portion of our borrowers through a limited number of online channels from a limited number of our strategic partners. We rely on certain data partners to collect credit information of borrowers for credit scoring and fraud detections. We anticipate that we will continue to leverage strategic relationships with existing strategic partners to grow our business while pursuing new relationships with additional strategic partners.

Pursuing, establishing and maintaining relationships with strategic partners require significant time and resources as does integrating third-party data and services with our system. Our current agreements with partners generally do not prohibit them from working with our competitors or from offering competing services. Our competitors may be more effective in providing incentives to our partners to favor their products or services, which may in turn reduce the volume of loans facilitated through our platform. Certain types of partners may devote more resources to support their own competing businesses. In addition, these partners may not perform as expected under our agreements with them, and we may have disagreements or disputes with them, which could adversely affect our brand and reputation. If we cannot successfully enter into and maintain effective strategic relationships with strategic partners, our business will be harmed.

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In addition, if any of our partners fails to perform properly, we cannot assure you that we will be able to find an alternative in a timely and cost-efficient manner or at all. Any of these occurrences could result in our diminished ability to operate our business, potential liability to borrowers and institutional funding partners, inability to attract borrowers and institutional funding partners, reputational damage, regulatory intervention and financial harm, which could negatively impact our business, financial condition and results of operations.

We have obligations to verify information relating to borrowers and detecting fraud. If we fail to perform such obligations to meet the requirements of relevant laws and regulations, we may be subject to liabilities.

Our business of connecting institutional funding partners and borrowers constitutes an intermediary service, and our contracts with institutional funding partners and borrowers are intermediation contracts under the Civil Code of the PRC, an intermediary that intentionally conceals any material information or provides false information in connection with the conclusion of an intermediation contract, which results in harm to the client’s interests may not claim for any service fee for its intermediary services, and is liable for any damage incurred by the client.

We refer borrowers to our institutional funding partners. The institutional funding partners will review the borrower’s application and our preliminary credit assessment, and then decide if to provide loans to such borrower as well as the credit limit after their independent credit review. Our agreements with these institutional funding partners and borrowers may be deemed as intermediary contracts under the Civil Code of the PRC. Therefore, if we fail to provide material information to institutional funding partners and are found to be at fault, for failure or deemed failure to exercise proper care, to conduct adequate information verification or supervision, we could be subject to liabilities as an intermediary under the Civil Code of the PRC. We leverage a large database of past fraud accounts information and sophisticated rule-based detection technology in detecting fraudulent behaviors. Based on new data collected and fraudulent behaviors detected during our daily business operations, we update our database on an as-needed basis. As the laws, regulations, rules and governmental policies governing the online consumer finance industry are relatively new, it is still unclear to what extent online consumer finance platform should exercise care in detecting fraud. Although we believe that as an information intermediary, we should not bear the credit risk for institutional funding partners as long as we take reasonable measures to detect fraudulent behaviors, we cannot assure you that we would not be subject to any liabilities under the current laws, regulations, rules and governmental policies governing the online consumer finance industry if we fail to detect any fraudulent behavior. If that were to occur, our results of operations and financial condition could be materially and adversely affected.

We may be deemed to use our own fund to finance certain loans and therefore subject us to regulatory risks.

The Interim Measures prohibits online finance information intermediaries from investing in loans using their own funds unless otherwise stipulated by laws and regulations. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services—Regulations on online lending information intermediaries.”

In addition, pursuant to the Measures for Illegal Financial Institutions, providing loans without the PBOC’s permission is deemed to be an illegal operation of financial business and the entity providing loans without the PBOC’s permission is deemed to be an illegal financial institution. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services—Regulations on illegal financial institutions and intermediaries.” In connection with our quality assurance commitments provided through third-party financing guarantee companies, we purchase creditors’ rights from third-party financing guarantee companies after these financing guarantee company repay the full overdue amounts to our institutional funding partners. After such purchase of creditors’ rights, the borrowers will continue to repay the remaining installments of principal and interest to us. We cannot rule out the possibility that relevant regulatory authorities may take the view that our such business practice constitutes an illegal operation of financial business without the PBOC’s permission and we may be deemed to be an illegal financial institution. If we were to find to violate the Measures for Illegal Financial Institutions, we would be subject to fines, penalties or other liabilities, which could materially and adversely affect our business, financial condition and prospects.

Our failure to compete effectively could adversely affect our results of operations and market share.

The online consumer finance industry in China is competitive and evolving. We compete with financial products and companies that attract borrowers, investors, and institutional funding partners. We primarily compete with leading online consumer finance companies in China. In addition, with respect to borrowers, we also compete with traditional financial institutions, such as consumer finance business units in commercial banks, credit card issuers and other consumer finance companies; with respect to institutional funding partners, our product offerings also compete with other products and asset classes, such as equities, bonds, investment trust products, bank savings accounts, real estate and alternative asset classes.

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Our competitors operate with different business models, have different cost structures or participate selectively in different market segments. They may ultimately prove more successful or more adaptable to new regulatory, technological and other developments. Some of our current and potential competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their platforms. Our competitors may also have more extensive borrower or funding sources, greater brand recognition and brand loyalty and broader partner relationships than us. Additionally, a current or potential competitor may acquire one or more of our existing competitors or form a strategic alliance with one or more of our competitors. Any of the foregoing could adversely affect our business, results of operations, financial condition and future growth.

In addition, our competitors may be better at developing new products, responding faster to new technologies and undertaking more extensive marketing campaigns. When new competitors seek to enter our target market, or when existing market participants seek to increase their market share, they sometimes undercut the pricing and/or terms prevalent in that market, which could adversely affect our market share or ability to exploit new market opportunities. Also, since the online consumer finance industry in China is relatively new and fast evolving, potential institutional funding partners and borrowers may not fully understand how our platform works and may not be able to fully appreciate the additional customer protections and features that we have invested in and adopted on our platform as compared to others. Our pricing and terms could deteriorate if we fail to act to meet these competitive challenges. Furthermore, to the extent that our competitors are able to offer more attractive terms to our cooperation partners, such cooperation partners may choose to terminate their relationships with us. If we are unable to compete with such companies and meet the need for innovation in our industry, the demand for our platform could stagnate or substantially decline, we could experience reduced revenues or our platform could fail to achieve or maintain more widespread market acceptance, any of which could harm our business and results of operations.

If we fail to promote and maintain our brand in a cost-efficient way, our business and results of operations may be harmed.

We believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing borrowers and institutional funding partners to our platform. This depends largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our platform. If any of our current marketing channels become less effective, if we are unable to continue to use any of these channels, if the cost of using these channels were to significantly increase or if we are not successful in generating new channels, we may not be able to attract new borrowers and institutional funding partners in a cost-effective manner or convert potential borrowers and institutional funding partners into active borrowers and institutional funding partners on our platform.

Our efforts to build our brand have caused us to incur significant expenses, and it is likely that our future marketing efforts will require us to incur significant additional expenses. These efforts may not result in increased revenues in the immediate future or at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business.

Any negative publicity with respect to us, the online consumer finance industry in general and our third party partners may materially and adversely affect our business and results of operations.

Reputation of our brand is critical to our business and competitiveness. Factors that are vital to our reputation include but are not limited to our ability to:

• maintain the quality and reliability of our platform;

• provide borrowers and institutional funding partners with a superior experience on our platform;

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• enhance and improve our credit assessment and risk-pricing models;

• effectively manage and resolve borrower and institutional funding partner complaints; and

• effectively protect personal information and privacy of borrowers and institutional funding partners.

Any malicious or negative allegation made by the media or other parties about the foregoing or other aspects of our company, including but not limited to our management, business, compliance with law, financial condition or prospects, whether with merit or not, could severely compromise our reputation and harm our business and operating results.

As the online consumer finance industry is a new industry in China and the regulatory framework for this industry is also evolving, negative publicity about this industry may arise from time to time. Negative publicity about China’s online consumer finance industry in general may also have a negative impact on our reputation, regardless of whether we have engaged in any inappropriate activities. The PRC government has instituted specific rules, including the Interim Measures, Circular 141, the Interim Measures for Banks and its supplement, to develop a more transparent regulatory environment for the online consumer finance industry. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services.” Any players in China’s online consumer finance industry who are not in compliance with these regulations may adversely impact the reputation of the industry as a whole. Furthermore, any negative development in, or negative perception of, the online consumer finance industry as a whole, even if factually incorrect or based on isolated incidents, could compromise our image, undermine the trust and credibility we have established and impose a negative impact on our ability to attract new borrowers and institutional funding partners. Negative developments in the online consumer finance industry, such as widespread borrower defaults, aggressive practices or misconduct in loan collection, fraudulent behavior and/or the closure of other online consumer finance platforms, may also lead to tightened regulatory scrutiny of the sector and limit the scope of permissible business activities that may be conducted by online consumer finance platforms like us.

In addition, negative publicity about our partners, outsourced service providers or other counterparties, such as negative publicity about their loan collection practices and any failure by them to adequately protect the information of our borrowers, to comply with applicable laws and regulations or to otherwise meet required quality and service standards could harm our reputation. If any of the foregoing takes place, our business and results of operations could be materially and adversely affected.

Fraudulent activity on our platform could negatively impact our operating results, brand and reputation and cause the use of our loan products and services to decrease.

We are subject to the risk of fraudulent activity both on our platform and associated with borrowers, institutional funding partners and other third parties handling borrower information. Our resources, technologies and fraud detection tools may be insufficient to accurately detect and prevent fraud. Significant increases in fraudulent activity could negatively impact our brand and reputation, result in losses suffered by the investors, reduce the volume of loans facilitated through our platform and lead us to take additional steps to reduce fraud risk, which could increase our costs and expenses. High profile fraudulent activity could even lead to regulatory intervention, and may divert our management’s attention and cause us to incur additional expenses and costs. If any of the foregoing were to occur, our results of operations and financial condition could be materially and adversely affected.

Our current level of fee rates may decline in the future. Any material reduction in our fee rates could reduce our profitability.

We earn a substantial majority of our revenues from the service fees that we collect from the third-party guarantee companies or our institutional funding partners on the loans facilitated through our online marketplace and the fees that we charge from the borrowers as the guarantee fees. The fee rates may vary from different business models and third-party guarantee companies or institutional funding partners. Any material reduction in our fee rates could have a material adverse effect on our business, results of operations and financial condition.

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Fluctuations in interest rates could negatively affect transaction volume facilitated through our platform.

All loans facilitated through our platform are issued with fixed interest rates. We determine the interest rates of the loans on our platform primarily based on the market conditions and the general interest rate environment rather than by referencing to a specific benchmark rate. The fluctuation of interest rates may affect the demand for loan services on our platform. For example, a decrease in interest rates may cause potential borrowers to seek lower-priced loans from other channels. A high interest rate environment will likely increase the funding costs for our institutional funding partners, which may lead to a higher rate of return required by such institutional funding partners and thereby dampen their desire to fund borrowers on our platform. If we fail to respond to the fluctuations in interest rates in a timely manner and adjust our loan products offering, the potential and existing investors may lose potential interest returns in our platform and products and delay or reduce future loan investments, and the potential and existing borrowers may show less interest in our loan products and marketplace. As a result, fluctuations in the interest rate environment may discourage institutional funding partners and borrowers from participating in our platform, which may adversely affect our business.

We may not be able to obtain additional capital on favorable terms or at all.

We need to make continued investments in facilities, hardware, software, technology systems and to retain talents to remain competitive. Due to the unpredictable nature of the capital markets and our industry, we cannot assure you that we will be able to raise additional capital on terms favorable to us, or at all, if and when required, especially if we experience disappointing operating results. If adequate capital is not available to us as required, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our infrastructure or respond to competitive pressures could be significantly limited, which would adversely affect our business, financial condition and results of operations. If we do raise additional funds through the issuance of equity or convertible debt securities, the ownership interests of our shareholders could be significantly diluted. These newly issued securities may have rights, preferences or privileges senior to those of existing shareholders.

Misconduct, errors and failure to function by our employees and third-party service providers could harm our business and reputation.

We are exposed to many types of operational risks, including the risk of misconduct and errors by our employees and third-party service providers. Our business depends on our employees and third-party service providers to interact with potential borrowers and institutional funding partners, process large numbers of transactions and support the loan collection process, all of which involve the use and disclosure of personal information. We could be materially adversely affected if transactions were redirected, misappropriated or otherwise improperly executed, if personal information was disclosed to unintended recipients or if an operational breakdown or failure in the processing of transactions occurred, whether as a result of human error, purposeful sabotage or fraudulent manipulation of our operations or systems. In addition, the manner in which we store and use certain personal information and interact with borrowers and institutional funding partners through our platform is governed by various PRC laws. It is not always possible to identify and deter misconduct or errors by employees or third-party service providers, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses. If any of our employees or third-party service providers take, convert or misuse funds, documents or data or fail to follow protocol when interacting with borrowers and institutional funding partners, we could be liable for damages and subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in the illegal misappropriation of funds, documents or data, or the failure to follow protocol, and therefore be subject to civil or criminal liability. In addition to our own collecting team, we also use certain third-party service providers for loan collection services. Aggressive practices or misconduct by any of our third-party service providers in the course of collecting loans could damage our reputation.

Any failure to comply with existing or future laws and regulations related to data protection, data security, cybersecurity or personal information protection could lead to liabilities, administrative penalties or other regulatory actions, which could negatively affect our operating results and business.

The regulatory framework on data collection, using, storage, and processing is relatively new and rapidly evolving, and some of them are ambiguous. In recent years, the PRC governmental authorities have strengthened the regulation of data collection, using, storage, and processing, especially for the personal data from internet websites and mobile applications. As the regulations regarding data protection, data security, cybersecurity and personal information protection are quickly evolving in China and globally, we may become subject to new laws and regulations applying to the solicitation, collection, processing or use of personal information that could affect how we store, process and share data with our borrowers.

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For example, in December 2012, the Standing Committee of the PRC National People’s Congress promulgated the Decision on Strengthening Network Information Protection, or the Network Information Protection Decision, to enhance the legal protection of information security and privacy on the internet. The Network Information Protection Decision also requires internet operators to take measures to ensure confidentiality of information of users. In July 2013, the Ministry of Industry and Information Technology, or the MIIT, promulgated the Provisions on Protection of Personal Information of Telecommunication and Internet Users to regulate the collection and use of users’ personal information in the provision of telecommunication service and internet information service in China. In August 2015, the Standing Committee of the National People’s Congress promulgated the Ninth Amendment to the Criminal Law, which became effective in November 2015 and amended the standards of crime of infringing citizens’ personal information and reinforced the criminal culpability of unlawful collection, transaction, and provision of personal information. It further provides that any internet content provider that fails to fulfill the obligations related to internet information security administration as required by applicable laws and refuses to rectify upon orders will be subject to criminal liability. In November 2016, the Standing Committee of the National People’s Congress promulgated the Cyber Security Law, which requires, among others, that network operators take security measures to protect the network from unauthorized interference, damage and unauthorized access and prevent data from being divulged, stolen or tampered with. Network operators are also required to collect and use personal information in compliance with the principles of legitimacy, properness and necessity, and strictly within the scope of authorization by the subject of personal information unless otherwise prescribed by laws or regulations. Significant capital, managerial and human resources are required to comply with legal requirements, enhance information security and to address any issues caused by security failures. On September 12, 2022, the CAC issued a draft to amend the Cyber Security Law and proposed to, among others, increase the maximum fines for entities from RMB1 million to RMB50 million or five percent of an entity’s previous year’s turnover, and from RMB100,000 to RMB1 million for directly responsible individuals for the following violations: (i) severe violations of cybersecurity protection obligations or severe harm to the security of network operation; (ii) failure to protect cyber information security, to take measures to suspend transfer of or delete information that is prohibited from distribution, or to take measures against relatively major security risks or security incidents; and (iii) distribution of transfer of prohibited information. In respect of the use by a critical information infrastructure operator of network products or services that have not been assessed or have failed a security assessment, the critical information infrastructure operator may be subject to a fine of up to ten times the procurement amount or five percent of its previous year’s turnover, with a penalty of up to RMB100,000 being imposed on directly responsible individuals. Such draft amendment was released for soliciting public comments only and their final form, interpretation and implementation remain substantially uncertain.

On January 23, 2019, the CAC, the MIIT, the MPS, and the State Administration for Market Regulation, or the SAMR, jointly promulgated the Notice on Rectification of Illegal Collection of Personal Information on Application, or the Notice on Illegal Collection, which requires application operators to strictly comply with the Cyber Security Law of the PRC and strengthens the personal information protection. Application operators should, among others, (i) clearly state the authorized purpose, methods and scope of the collection and usage of personal information, and obtain the consent of users for collecting and processing such users’ personal information, and (ii) establish appropriate user information protection systems with remedial measures. To further implement and interpret the Notice on Illegal Collection, the Measures on Identifying Illegality of Personal Information Collection Conducts on Application was promulgated on November 28, 2019.

On May 1, 2021, the Regulations on the Scope of Necessary Personal Information Collected by the Frequently Used Mobile Applications, or the Scope of Necessary Personal Information, jointly promulgated by the CAC, the MIIT, the MPS and the SAMR came into effect, which provides, among others, that: (i) the application operators may not refuse to provide fundamental function services to the users for reason that such users refuse to provide the personal information out of the scope of necessity; (ii) the fundamental function service of online lending applications is to facilitate loans provided to the users online for use of personal consumption and business operation; and (iii) the necessary personal information includes the borrower’s mobile phone number, name, bank account, as well as type, number and valid period of its identity card. The different governmental authorities, including the MIIT, have been inspecting various mobile applications on the market on the enforcement of data protection and may continue to do so in the future, even with more stringent scrutiny. In 2021, the MIIT and its local branch decided that our PPDai mobile application, which is operated by Shanghai PPDai, was collecting users’ personal information in a non-compliance way. We had taken remedial measures in a timely manner and reported our rectification measures to the relevant governmental authorities. The authorities did not take any further follow-up inquiries or investigations into the identified issues after our adoption of remedial measures. If the authorities identify any new non-compliance issues related to data protection in the future, they may further order us to make additional rectifications, and if our then remedial measures are not satisfactory to them, our PPDai mobile application may be removed from the relevant mobile application store, which may materially and adversely affect our business and operating results.

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On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the Data Security Law, which took effect in September 2021. The Data Security Law, among others, provides for a security review procedure for the data activities that may affect national security. Furthermore, the Measures for Cybersecurity Review, which became effective on June 1, 2020, set forth the cybersecurity review mechanism for critical information infrastructure operators, and provided that critical information infrastructure operators who intend to purchase internet products and services that affect or may affect national security shall be subject to a cybersecurity review. On July 30, 2021, the state council promulgated the Regulations on Protection of Critical Information Infrastructure, which became effective on September 1, 2021. Pursuant to the Regulations on Protection of Critical Information Infrastructure, critical information infrastructure shall mean any important network facilities or information systems of the important industry or field such as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs and national defense science, which may endanger national security, people’s livelihood and public interest in case of damage, function loss or data leakage. In addition, relevant administration departments of each critical industry and sector, or Protection Departments, shall be responsible to formulate eligibility criteria and determine the critical information infrastructure operator in the respective industry or sector. The operators shall be informed about the final determination as to whether they are categorized as critical information infrastructure operators. On December 14, 2022, the PBOC issued the Regulations on the Supervision and Administration of Financial Infrastructure (Draft for Comment), or the Draft Regulations on Financial Infrastructure, which provides that (i) financial infrastructure refers to registration and custody system, clearing and settlement system, trading facilities, trading report database, critical payment system, and credit reference system of the financial assets, and (ii) financial infrastructure operator refers to the enterprises that are approved according to the laws and regulations to construct, operate, and maintain the financial infrastructure. The Draft Regulations on Financial Infrastructure has been released for public comment only, and its provisions and the anticipated adoption or effective date may be subject to change with substantial uncertainty. As of the date of this annual report, we have not been informed as a critical information infrastructure operator, nor as a network platform operator processing data that may affect national security by any government authorities. Furthermore, the exact scope of “critical information infrastructure operators” under the current regulatory regime remains unclear, and the PRC government authorities may have wide discretion in the interpretation and enforcement of these laws. Therefore, it is uncertain whether we would be deemed as a critical information infrastructure operator under PRC law. If we are deemed as a critical information infrastructure operator under the PRC cybersecurity laws and regulations, we must fulfill certain obligations as required under the PRC cybersecurity laws and regulations, including, among others, storing personal information and important data collected and produced within the PRC territory during our operations in China, which we have fulfilled in our business, and we may be subject to review when purchasing internet products and services. We also cannot rule out the possibility that some of our customers could be classified as critical information infrastructure operator, in which case our products or services, if deemed related to national security, will be submitted for cybersecurity review before we can enter into agreements with such customers. If the relevant authorities deem that the use of our products and services by our customers that are critical information infrastructure operator involves risks of disruption, is vulnerable to external attacks, or may negatively affect, compromise, or weaken the protection of national security, we may not be able to provide our products or services to such customers. This could have a material adverse effect on our business operation and financial results. On August 20, 2021, the Standing Committee of the National People’s Congress of China promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect on November 1, 2021. Our mobile apps and websites only collect user personal information that we believe is necessary to provide the corresponding services. We update our privacy policies from time to time to meet the latest regulatory requirements of the CAC and other authorities and adopt technical measures to protect data and ensure cybersecurity in a systematic way. Nonetheless, the Personal Information Protection Law raises the protection requirements for processing personal information, and many specific requirements of the Personal Information Protection Law remain to be clarified by the CAC, other regulatory authorities, and courts in practice. If the CAC or the relevant governmental authorities deem us as collecting excessive personal information, including the sensitive personal information, that beyond the necessity to provide the corresponding services, we may be required to make further adjustments to our business practices to comply with the personal information protection laws and regulations. See “Item 4. Information on the Company—B. Business Overview—Regulations.”

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On November 14, 2021, the CAC released the Regulations on the Network Data Security (Draft for Comments), or the Draft Data Security Regulations. The Draft Data Security Regulations provide that data processors refer to individuals or organizations that autonomously determine the purpose and the manner of processing data. In accordance with the Draft Data Security Regulations, data processors shall apply for a cybersecurity review for the following activities: (i) merger, reorganization or division of Internet platform operators that have acquired a large number of data resources related to national security, economic development or public interests to the extent that affects or may affect national security; (ii) listing abroad of data processors which process over one million users’ personal information; (iii) the listing of data processors in Hong Kong which affects or may affect national security; or (iv) other data processing activities that affect or may affect national security. However, there have been no clarifications from the authorities as of the date of this annual report as to the standards for determining such activities that “affects or may affect national security.” See “Item 4. Information on the Company—B. Business Overview—Regulations.” As of the date of this annual report, the Draft Data Security Regulations were released for public comment only, and their respective provisions and the anticipated adoption or effective date may be subject to change with substantial uncertainty. The Draft Data Security Regulations remain unclear on whether the relevant requirements will be applicable to companies that have been listed in the United States, such as us. We cannot predict the impact of the Draft Data Security Regulations, if any, at this stage, and we will closely monitor and assess any development in the rule-making process. If the enacted versions of the Draft Data Security Regulations mandate clearance of cybersecurity review and other specific actions to be completed by China-based companies listed on a U.S. stock exchange, such as us, we face uncertainties as to whether such clearance can be timely obtained, or at all. On January 4, 2022, the CAC, the NDRC, the MIIT, and several other administrations jointly published the amended Measures for Cybersecurity Review, or the Amended Measures for Cybersecurity Review, which became effective on February 15, 2022. The Amended Measures for Cybersecurity Review further restates and expands the applicable scope of the cybersecurity review. Pursuant to the Amended Measures for Cybersecurity Review, (i) when the purchase of network products and services by a critical information infrastructures operator or the data processing activities conducted by a network platform operator affect or may affect national security, a cybersecurity review shall be conducted pursuant to the Review Measures. The operators shall file for a cybersecurity review with Cybersecurity Review Office under the CAC if their behavior affects or may affect national security; (ii) an application for cybersecurity review shall be made by an issuer who is a network platform operator holding personal information of more than one million users before such issuer applies to list its securities on a foreign stock exchange; and (iii) the relevant PRC governmental authorities may initiate cybersecurity review if such governmental authorities determine that the issuer’s network products or services, or data processing activities affect or may affect national security. The Amended Measures for Cybersecurity Review was promulgated recently, and there are substantial uncertainties on the interpretation and application of the Amended Measures for Cybersecurity Review. As of the date of this annual report, we have not been involved in any formal investigations on cybersecurity review made by the CAC on such basis. In anticipation of the strengthened implementation of cybersecurity laws and regulations and the continued expansion of our business, we face potential risks if we are deemed as a critical information infrastructure operator, or if our data processing activities raise “national security” concern under the Amended Measures for Cybersecurity Review. In such case, if we are not able to comply with the cybersecurity and network data security requirements in a timely manner, or at all, we may be subject to government enforcement actions and investigations, fines, penalties, suspension of our non-compliant operations, or removal of our app from the relevant application stores, among other sanctions, which could materially and adversely affect our business and results of operations. In addition to the cybersecurity review, the Draft Data Security Regulations requires that data processors processing “important data” or listed overseas shall conduct an annual data security assessment by itself or commission a data security service provider to do so and submit the assessment report of the preceding year to the municipal cybersecurity department by the end of January each year. If a final version of the Draft Data Security Regulations is adopted, we may be subject to review when conducting data processing activities and annual data security assessment and may face challenges in addressing its requirements and make necessary changes to our internal policies and practices in data processing.

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On July 7, 2022, the CAC published the Measures for Security Assessment of Cross-border Data Transfer, or the Cross-border Data Security Regulations, which came into effect on September 1, 2022. The Cross-border Data Security Regulations stipulates that if the cross-border data transfer to be conducted by a “data processor” has any of the following circumstances, the “data processor” shall apply to the national cyberspace administration authority for security assessment via the provincial cyberspace administration authority in the place where the said “data processor” is located: (i) any data processor transfers important data to overseas recipients; (ii) any “critical information infrastructure operator,” or any “data processor” processing the personal information of more than one million individuals transfers personal information to overseas recipients; (iii) the personal information of more than 100,000 individuals or the sensitive personal information of more than 10,000 individuals has been provided overseas since January 1 of the previous year on a cumulative basis; and (iv) other circumstances where the security assessment is required as prescribed by the national cyberspace administration authority. For cross-border data transfer activities conducted before September 1, 2022, the Cross-border Data Security Regulations provides data processors a six-month grace period to remedy any non-compliance by March 1, 2023. Since there might be newly issued explanations or implementation rules, uncertainties with respect to applications to the CAC under the Cross-border Data Security Regulations still exist. We have been expanding our business in the overseas markets, including the Philippines and Indonesia, which has exposed us to and may continue to expose us to additional data security regulatory uncertainties. We will continue to monitor and review our compliance status in accordance with the latest changes in applicable regulatory requirements. On February 24, 2023 the CSRC, Ministry of Finance of the PRC, National Administration of State Secrets Protection, and National Archives Administration of China published the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Confidentiality and Archives Administration Provisions. Pursuant to Confidentiality and Archives Administration Provisions, domestic joint-stock enterprises listed in overseas markets via direct offering and domestic operational entities of enterprises listed in overseas markets via indirect offering must obtain approval and complete filing or other requirements before they publicly disclose any documents and materials that contain state secrets or government work secrets or that, if divulged, will jeopardize China’s national security or public interest, or before they provide such documents or materials to entities or individuals such as securities companies, securities service providers and overseas regulators. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Overseas Listing and M&A.”

The Cyber Security Law, the Data Security Law, and the Amended Measures for Cybersecurity Review are relatively new and subject to interpretation by the regulators. Although we believe that we only gain access to user information that is necessary for, and relevant to, the services provided, the data we obtain and use may include information that is deemed as “personal information”, “network data” or “important data” under the relevant laws and regulations. As such, we have adopted a series of measures to ensure that we comply with relevant laws and regulations in the collection, use, disclosure, sharing, storage, and security of user information and other data. The Data Security Law also stipulates that the relevant authorities will formulate the catalogs for important data and strengthen the protection of important data, and state core data, i.e. data having a bearing on national security, the lifelines of national economy, people’s key livelihood and major public interests, shall be subject to stricter management system. “Item 4. Information on the Company—B. Business Overview—Regulations.” The exact scopes of important data and state core data remain unclear and may be subject to further interpretation. If any data that we are in possession of constitutes important data or state core data, we may be required to adopt stricter measures for protection and management of such data.

We also face indirect technology, cybersecurity and operational risks relating to the third parties upon whom we rely to facilitate or enable our business activities, including, among others, third-party online payment service providers who manage accounts for certain borrower and institutional funding partner funds. As a result of increasing consolidation and interdependence of technology systems, a technology failure, cyber-attack or other information or security breach that significantly compromises the systems of one entity could have a material impact on its counterparties. Although our agreements with third-party payment service providers provide that each party is responsible for the cybersecurity of its own systems, any cyber-attack, computer viruses, physical or electronic break-ins or similar disruptions of such third-party payment service providers could, among other things, adversely affect our ability to serve our users, and could even result in misappropriation of funds of our borrowers and institutional funding partners. If that were to occur, both we and third-party payment service providers could be held liable to borrowers and institutional funding partners who suffer losses from the misappropriation.

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Our business depends on our employees and third-party service providers to interact with potential borrowers and institutional funding partners, process large numbers of transactions and support the loan collection process, all of which involve the use and disclosure of personal information. Compliance with applicable data protection laws and regulations is a rigorous and time-intensive process. We have established a comprehensive administrative mechanism and standardized employee training system for stringent information security management, and we have received ISO 27001 Information Security Management System Certification and ISO 9001 Quality Management System Certification. We have also been deploying innovative technologies to promote user data protection. For example, we launched a Smart Finance Institute in 2018 for research and development in the field of artificial intelligence that can be applied in various aspects of financial services. In addition, we are also a member of the National Information Security Standardization Technical Committee, maintaining up to date knowledge and compliant regarding the latest cyber-security regulatory requirements. For the purpose of credit assessment, we also collaborate with third-party data providers to obtain the borrowers’ credit and behavior data, with general consents from the borrowers. Although we require the third-party data providers guarantee that the data provided to us is lawfully collected and legally authorized and their collaboration with us will not violate any applicable laws and regulations, we cannot assure you that the third-party data providers would strictly comply with the applicable laws and regulation during their process of data collection, using, storage, and processing. If any of our third-party data providers fails to comply with applicable data protection laws and regulations, our reputation could suffer and we could become subject to regulatory intervention. Furthermore, our collaboration with third-party data providers may subject us to significant civil or criminal penalties and negative publicity or result in the delayed or halted processing of personal data that we need to undertake to carry on our business, which could have a material adverse effect on our business, financial condition and results of operations. See “—Cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions of us or of a third party could result in disclosure or misuse of confidential information and misappropriation of funds of our borrowers and institutional funding partners, subject us to liabilities, cause reputational harm and adversely impact our results of operations and financial condition.”

If our ability to collect delinquent loans is impaired, our business and results of operations might be materially and adversely affected.

We primarily rely on our in-house collection team to handle the collection of delinquent loans. We also engage certain third-party collection service providers to assist us with loan collection. If our or third party agencies’ primary collection methods, such as phone calls, text messages, legal letters and legal proceedings, are not as effective as they were and we fail to respond quickly and improve our collection methods, our delinquent loan collection rate may decrease and our investors may suffer loss. In addition, we bear credit risks for a substantial majority of the loans funded by our institutional funding partners to borrowers introduced by us. If our ability to collect delinquent loans is not as effective or efficient as expected, our liquidity, financial conditions and results of operations could be materially and adversely affected.

Moreover, according to the Circular 141, delinquent loans shall not be collected by means of violence, intimidation, insult, defamation, or harassment. Any violation of the Circular 141 may result in penalties, including but not limited to suspension of operation, orders to make rectification, condemnation, revocation of license, be ordered to cease business operations, and even criminal liabilities. If the collection methods we use in collecting delinquent loans are viewed by the borrowers or regulatory authorities as harassments, threats or other illegal conducts, we may be subject to lawsuits initiated by the borrowers or prohibited by the regulatory authorities from using certain collection methods. If this were to happen and we fail to adopt alternative collection methods in a timely manner or the alternative collection methods are proven not effective, we might not be able to maintain our delinquent loan collection rate and the investors’ confidence in our platform may be negatively affected. Furthermore, the MPS promulgated the Guidance on Several Issues for Soft Violence Regarding Criminal Case, or the Guidance on Soft Violence, on April 9, 2019, which provides that, among others, harassments by means of internet or telecommunication to disturb people’s normal life, work, production, business, and social order may be deemed as soft violence, which may be subject to criminal liabilities. In 2019, several public security authorities in different provinces took actions against some loan collection outsourcing companies, and even criminal cases were reported to be charged against some of them. We have established strict implementation policies to ensure that our collection personnel and third-party collection service providers do not engage in aggressive practices. However, our in-house collection team is large and we cannot assure each of them would strictly comply with our policies. Furthermore, we have no direct control over the management of third-party collection service providers. If any practices by our in-house collection team members or our third-party collection service providers were deemed by the governmental authorities as aggressive collection or soft violence, our reputation and business would be materially and adversely affected. If any of the foregoing takes place and impairs our ability to collect delinquent loans, the transaction volumes on our platform will decrease and our business and results of operations could be materially and adversely affected.

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Cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions of us or of a third party could result in disclosure or misuse of confidential information and misappropriation of funds of our borrowers and institutional funding partners, subject us to liabilities, cause reputational harm and adversely impact our results of operations and financial condition.

Our computer system and data storage facilities, the networks we use, the networks of other third parties with whom we interact, are potentially vulnerable to physical or electronic computer break-ins, viruses and similar disruptive problems or security breaches. A party that is able to circumvent our security measures could misappropriate proprietary information or customer information, jeopardize the confidential nature of the information we transmit over the internet and mobile network or cause interruptions in our operations. We or our service providers may be required to invest significant resources to protect against the threat of security breaches or to alleviate problems caused by any breaches.

In addition, our platform collects, stores, and processes certain personal and other sensitive data from our borrowers. The data that we have processed and stored makes us or third-party service providers who host our servers a target and potentially vulnerable to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. While we have taken steps to protect the confidential information that we have access to and put in place internal reporting procedures relating to cybersecurity incidents, our security measures could be breached. As of the date of this annual report, we have not experienced any material cyber security incidents. However, we cannot assure you that our security measures will not be breached in the future. Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or other unauthorized access to our platform could cause confidential borrower and institutional funding partner information to be stolen and used for criminal purposes.

We also face indirect technology, cybersecurity and operational risks relating to the third parties upon whom we rely to facilitate or enable our business activities, including, among others, third-party online payment service providers who manage accounts for certain borrower and institutional funding partner funds. As a result of increasing consolidation and interdependence of technology systems, a technology failure, cyber-attack or other information or security breach that significantly compromises the systems of one entity could have a material impact on its counterparties. Although our agreements with third-party payment service providers provide that each party is responsible for the cybersecurity of its own systems, any cyber-attack, computer viruses, physical or electronic break-ins or similar disruptions of such third-party payment service providers could, among other things, adversely affect our ability to serve our users, and could even result in misappropriation of funds of our borrowers and institutional funding partners. If that were to occur, both we and third-party payment service providers could be held liable to borrowers and institutional funding partners who suffer losses from the misappropriation.

Security breaches or unauthorized access to or sharing of confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. In addition, leakages of confidential information may be caused by third-party service providers or business partners. If security measures are breached because of third-party action, employee misconduct or error, failure in information security management, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with borrowers, institutional funding partners and business partners could be severely damaged, we may become susceptible to future claims if our borrowers, institutional funding partners or business partners suffer damages, and could incur significant liability, and our business and operations could be adversely affected.

We are subject to governmental regulation and other legal obligations related to the protection of personal data, privacy and information security in the regions where we do business, and there has been and may continue to be a significant increase in such laws that restrict or control the use of personal data. See “—Any failure to comply with existing or future laws and regulations related to data protection, data security, cybersecurity or personal information protection could lead to liabilities, administrative penalties or other regulatory actions, which could negatively affect our operating results and business.”

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Any failure by our institutional funding partners or third-party service providers to comply with applicable anti-money laundering and anti-terrorism financing laws and regulations could damage our reputation.

If any of our institutional funding partners fails to comply with applicable anti-money laundering laws and regulations, it could become subject to regulatory intervention or sanction and its business may be adversely effected, which could further have a material adverse effect on our reputation, business financial condition and results of operations.

Currently, we rely on our third-party service providers, in particular payment companies, that handle the transfer of funds between borrowers and institutional funding partners, to have their own appropriate anti-money laundering policies and procedures. The payment companies are subject to anti-money laundering obligations under applicable anti-money laundering laws and regulations and are regulated in that respect by the PBOC. If any of our third-party service providers fails to comply with applicable anti-money laundering laws and regulations, our reputation could suffer and we could become subject to regulatory intervention, which could have a material adverse effect on our business, financial condition and results of operations.

In October 2018, the PBOC, the CBIRC, and the CSRC, jointly issued the Anti-money Laundering and Anti-terrorism Financing Administrative Measures for Internet Finance Institution, or Anti-money Laundering and Anti-terrorism Measures, providing that internet finance institutions are obliged to accept the anti-money laundering and anti-terrorism financing inspection conducted by the PBOC and its branches. The Anti-money Laundering and Anti-terrorism Measures also authorized the establishment of the internet finance anti-money laundering and anti-terrorism financing monitor platform, or the Monitor Platform, by the National Internet Finance Association, or NIFA under the instruction of PBOC and other financial governmental authorities to improve the online monitoring mechanism and information sharing between the institutions. To comply with the Anti-money Laundering and Anti-terrorism Measures, we are formulating policies, including internal controls and “know-your-customer” procedures and accessing the Monitor Platform. We cannot assure you that we will be able to establish and maintain effective anti-money laundering and anti-terrorism financing policies and procedures to protect our platform from being exploited for money laundering or terrorism financing purposes or that such policies and procedures, if adopted, will be deemed to be in compliance with applicable anti-money laundering and anti-terrorism financing laws and regulations, including the Interim Measures.

If we fail to maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.

We are subject to reporting obligations under the U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of our internal control over financial reporting. As we are no longer an emerging growth company, we are subject to the requirement that an independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting.

Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15I under the Exchange Act) and internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) as of the end of the period covered by this annual report, as required by Rule 13a-15(b) through (c) under the Exchange Act. Based upon that evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2022. Our independent registered public accounting firm, PricewaterhouseCoopers Zhong Tian LLP, also attested and reported our internal control over financial reporting. See the attestation report on page F-2 issued by our independent registered public accounting firm for further details. However, if we fail to maintain effective internal control over financial reporting in the future, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

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Our operations depend on the performance of the internet infrastructure and telecommunications networks in China.

Almost all access to the internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the MIIT. We primarily rely on a limited number of telecommunication service providers to provide us with data communications capacity through local telecommunications lines and internet data centers to host our servers. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on our platform. We cannot assure you that the internet infrastructure and the fixed telecommunications networks in China will be able to support the demands associated with the continued growth in internet usage.

In addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay for telecommunications and internet services rise significantly, our results of operations may be adversely affected. Furthermore, if internet access fees or other charges to internet users increase, our user traffic may decline and our business may be harmed.

Any significant disruption in service on our platform, in our computer systems or third party service providers’ systems, including events beyond our control, could prevent us from processing or posting loans on our platform, reduce the attractiveness of our platform and result in a loss of borrowers or investors.

In the event of a platform outage and physical data loss, our ability to perform our servicing obligations, process loan applications or make funds available on our platform would be materially and adversely affected. The satisfactory performance, reliability and availability of our platform and our underlying network infrastructure are critical to our operations, customer service, reputation and our ability to retain existing and attract new borrowers and institutional funding partners. Much of our system hardware is hosted in a leased facility located in Shanghai that is operated by our IT staff. We also maintain a real-time backup system in the same facility and a remote backup system at a separate facility also located in Shanghai. Our operations depend on our ability to protect our systems against damage or interruption from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm our systems, criminal acts and similar events. If there is a lapse in service or damage to our leased facilities in Shanghai, we could experience interruptions and delays in our service and may incur additional expense in arranging new facilities.

Any interruptions or delays in our service, whether as a result of third-party or our error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with our borrowers and institutional funding partners and our reputation. Additionally, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage. These factors could prevent us from processing or posting payments on loans, damage our brand and reputation, divert our employees’ attention, subject us to liability and cause borrowers and institutional funding partners to abandon our platform, any of which could adversely affect our business, financial condition and results of operations.

Our platform and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.

Our platform and internal systems rely on software that is highly technical and complex. In addition, our platform and internal systems depend on the ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely has contained, and may now or in the future contain, undetected errors or bugs. Some errors may only be discovered after the code has been released for external or internal use. Errors or other design defects within the software on which we rely may result in a negative experience for borrowers and institutional funding partners using our platform, delay introductions of new features or enhancements, result in errors or compromise our ability to protect borrower or investor data or our intellectual property. Any errors, bugs or defects discovered in the software on which we rely could result in harm to our reputation, loss of borrowers or investors or liability for damages, any of which could adversely affect our business, results of operations and financial condition.

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We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.

We regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality, invention assignment and non-compete agreements with our employees and others to protect our proprietary rights. See also “Item 4. Information on the Company—B. Business Overview—Intellectual Property.” Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages. In addition, because of the rapid pace of technological change in our industry, parts of our business rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms, or at all.

It Is often difficult to maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Preventing any unauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. To the extent that our employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related know-how and inventions. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.

We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in China, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits.

Additionally, the application and interpretation of China’s intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure you that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations may be materially and adversely affected.

We may be held liable for information or content displayed on, retrieved from or linked to our mobile applications, which may materially and adversely affect our business and operating results.

We offer consumer finance products mainly through our mobile applications, which are regulated by the Administrative Provisions on Mobile Internet Applications Information Services, or the APP Provisions, promulgated by the CAC on June 28, 2016 and effective on August 1, 2016, and amended on June 14, 2022. According to the APP Provisions, the providers of mobile applications shall not create, copy, publish or distribute information and content that is prohibited by laws and regulations. We have implemented internal control procedures screening the information and content on our mobile applications to ensure their compliance with the APP Provisions. However, we cannot assure that all the information or content displayed on, retrieved from or linked to our mobile applications complies with the requirements of the APP Provisions at all times. If our mobile applications were found to be violating the APP Provisions, we may be subject to administrative penalties, including warning, service suspension or removal of our mobile applications from the relevant mobile application store, which may materially and adversely affect our business and operating results.

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We may from time to time be subject to claims, controversies, lawsuits and legal proceedings, which could have a material adverse effect on our financial condition, results of operations, cash flows and reputation.

We may from time to time become subject to or involved in various claims, controversies, lawsuits, and legal proceedings. See “Item 8. Financial Information—Legal Proceedings” for more details. Claims, lawsuits, and litigations are subject to inherent uncertainties, and we are uncertain whether the foregoing claim would develop into a lawsuit. Lawsuits and litigations may cause us to incur defense costs, utilize a significant portion of our resources and divert management’s attention from our day-to-day operations, any of which could harm our business. Any settlements or judgments against us could have a material adverse impact on our financial condition, results of operations and cash flows. In addition, negative publicity regarding claims or judgments made against us may damage our reputation and may result in material adverse impact on us.

From time to time we may evaluate and potentially consummate strategic investments or acquisitions, which could require significant management attention, disrupt our business and adversely affect our financial results.

We may evaluate and consider strategic investments, combinations, acquisitions or alliances to further increase the value of our platform and better serve borrowers and institutional funding partners. These transactions could be material to our financial condition and results of operations if consummated. If we are able to identify an appropriate business opportunity, we may not be able to successfully consummate the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.

Strategic investments or acquisitions will involve risks commonly encountered in business relationships, including:

• difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, rights, platforms, products and services of the acquired business;

• inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits;

• difficulties in retaining, training, motivating and integrating key personnel;

• diversion of management’s time and resources from our daily operations;

• difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations;

• difficulties in retaining relationships with customers, employees and suppliers of the acquired business;

• risks of entering markets in which we have limited or no prior experience;

• regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business;

• assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability;

• failure to successfully further develop the acquired technology;

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• liability for activities of the acquired business before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities;

• potential disruptions to our ongoing businesses; and

• unexpected costs and unknown risks and liabilities associated with strategic investments or acquisitions.

We may not make any investments or acquisitions, or any future investments or acquisitions may not be successful, may not benefit our business strategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intended benefits. In addition, we cannot assure you that any future investment in or acquisition of new businesses or technology will lead to the successful development of new or enhanced loan products and services or that any new or enhanced loan products and services, if developed, will achieve market acceptance or prove to be profitable.

Our business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to continue in their present positions, our business may be severely disrupted.

Our business operations depend on the continued services of our senior management, particularly the executive officers named in this annual report. While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services. For example, our former chief executive officer resigned in March 2023 due to personal reasons, and our board of directors appointed Mr. Tiezheng Li, the then vice chairman of our board and president, to assume the position of chief executive officer. If any additional key executives were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain qualified personnel. In addition, although we have entered into confidentiality and non-competition agreements with our management, there is no assurance that any member of our management team will not join our competitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all.

Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.

We believe our success depends on the efforts and talent of our employees, including risk management, software engineering, financial and marketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees. Competition for highly skilled technical, risk management and financial personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.

In addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training new employees, and the quality of our services and our ability to serve borrowers and institutional funding partners could diminish, resulting in a material adverse effect to our business.

Increases in labor costs in the PRC may adversely affect our business and results of operations.

The economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs or pass on these increased labor costs to our users by increasing the fees of our services, our financial condition and results of operations may be adversely affected.

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We are subject to changing law and regulations regarding regulatory matters, corporate governance and public disclosure that have increased both our costs and the risk of non-compliance.

We are subject to rules and regulations by various governing bodies, including, for example, the SEC, which is charged with the protection of investors and the oversight of companies whose securities are publicly traded, and the various regulatory authorities in China and the Cayman Islands, and to new and evolving regulatory measures under applicable law. Our efforts to comply with new and changing laws and regulations have resulted in and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may be subject to penalty and our business may be harmed.

If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.

We believe that a critical component of our success is our corporate culture, which we believe fosters innovation, encourages teamwork and cultivates creativity. As we develop the infrastructure of a public company and continue to grow, we may find it difficult to maintain these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.

We do not have any business insurance coverage.

Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies. Currently, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our results of operations and financial condition.

We face risks related to COVID-19 outbreaks, other health epidemics and outbreaks and natural disasters, which could significantly disrupt our operations.

We are vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide products and services on our platform.

Our business had been adversely affected by the effects of COVID-19 outbreaks. Since the beginning of 2020, outbreaks of COVID-19 have resulted in the temporary closure of many corporate offices, retail stores, and manufacturing facilities across China. Normal economic life throughout China has been sharply curtailed. We have taken a series of measures in response to the outbreak to protect our employees, including facilitating remote working arrangements for our employees and canceling business meetings and travels. All of the above measures reduced our business operation capacity, impaired our ability to collect delinquent loans, and negatively affected our operating results.

As COVID-19 has negatively affected the global economy, the countries where we operate may continue to experience lower domestic consumption, higher unemployment, severe disruptions to exporting of goods to other countries and greater economic uncertainty, which may impact our business in a materially negative way as people in general may be less inclined to borrow. Borrowers may also have less propensity or ability to repay their loans as a result of the economic problems caused by COVID-19, which may then impact credit quality. The operations of some of our business partners and service providers have also be constrained and impacted, which may have a negative impact on our business.

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China began to modify its zero-COVID policy at the end of 2022, which seems to have prompted a considerable degree of uncertainties about the economic and market outlook. Thus, we have to be prepared for the possibility for a wide range of possible outcomes, some of which could be highly unfavorable to our business. There is still uncertainty as to the future impact of the virus, especially in light of this change in policy. The extent to which the pandemic impacts our results of operations going forward will depend on future developments which are highly uncertain and unpredictable, including the frequency, duration and extent of outbreaks of COVID-19, the appearance of new variants with different characteristics, the success or failure of efforts to contain or treat cases, and future actions we or the authorities may take in response to these developments. Consequently, the COVID-19 pandemic may continue to materially and adversely affect our business, financial condition and results of operations in the current and future years.

In addition, our business could also be adversely affected by the effects of Ebola virus disease, Zika virus disease, H1N1 flu, H7N9 flu, avian flu, Severe Acute Respiratory Syndrome or other epidemic, since it could require our employees to be quarantined and/or our offices to be disinfected or even temporarily closed.

Our headquarters are located in Shanghai, where most of our directors and management and a large majority of our employees currently reside. In addition, most of our system hardware and back-up systems are hosted in leased facilities located in Shanghai. Consequently, we are highly susceptible to factors adversely affecting Shanghai. If any of the abovementioned natural disasters, health epidemics or other outbreaks were to occur in Shanghai, our operation may experience material disruptions, such as temporary closure of our offices and suspension of services, disruption of communications between our headquarters and overseas operations, which may materially and adversely affect our business, financial condition and results of operations.

Risks Related to Our Corporate Structure

If the PRC government deems that the contractual arrangements in relation to the consolidated variable interest entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

Foreign ownership of internet-based businesses, such as distribution of online information, is subject to restrictions under current PRC laws and regulations. For example, except otherwise provided, foreign investors are generally not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (except for e-commerce, domestic multi-party communication, storage and forwarding and call center) in accordance with the Special Administrative Measures for Foreign Investment Access, the Negative List (2021), which was promulgated by the MOFCOM and the NDRC on December 27, 2021 and became effective on January 1, 2022. Foreign direct investment in telecommunications companies in China is governed by the Provisions on the Administration of Foreign-Invested Telecommunications Enterprises, which was promulgated by the State Council on December 11, 2001 and amended on September 10, 2008, February 6, 2016, and April 7, 2022. These regulations require that the foreign investors may acquire up to 50% equity interests the foreign-invested value-added telecommunications enterprises in China. PRC regulations impose sanctions for engaging in commercial internet information services, which is a sub-set of value-added telecommunication business, without a value-added telecommunication service license for internet content provider, or the ICP License, and sanctions for engaging in the operation of online data processing and transaction processing, which is another sub-set of value-added telecommunication business, without a value-added telecommunication service license for online data processing and transaction processing, or the ODPTP License. These sanctions include rectification orders and warnings from the PRC communication administrations, fines, confiscation of illegal gains, and suspension or termination of operating of the websites and mobile applications in question.

We are a Cayman Islands company and our PRC subsidiaries are considered foreign invested enterprises. Before the Interim Measures was published in August 2016, there was no clear official guidance or interpretation from the PRC government as to whether online consumer finance service was a type of value-added telecommunication services and whether its provider should be subject to value-added telecommunication regulations. However, we believe the online consumer finance services offered through our online platform constitute a type of value-added telecommunication services that foreign ownership and investment is restricted and therefore we should operate our online platform through a consolidated variable interest entity to ensure compliance with the relevant PRC laws and regulations. We have entered into the following four separate sets of contractual arrangements: (i) among Shanghai Guangjian, Shanghai Shanghu (with respect to the business operation agreement and the exclusive technology consulting and service agreement only), Beijing Paipairongxin, Shanghai PPDai (with respect to the exclusive technology consulting and service agreement only), a subsidiary of Beijing Paipairongxin, and the shareholders of Beijing Paipairongxin to conduct our online lending information intermediary business in the past; (ii) among Shanghai Manyin, Shanghai Zihe and the shareholders of Shanghai Zihe to provide services to our institutional funding partners; and (iii) among Shanghai Manyin, Shanghai Ledao and the shareholders of Shanghai Ledao for new business we plan to operate in the future. For a detailed description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.” As a result of these contractual arrangements, we have obtained control over Beijing Paipairongxin, Shanghai Zihe, Shanghai Ledao and their subsidiaries and consolidate their operating results in our financial statements under U.S. GAAP. Shanghai PPDai has been operating our online lending information intermediary business, including, among others, operations of our www.ppdai.com website and PPDai mobile application. Shanghai PPDai had made applications for value-added telecommunication business license with the relevant local telecommunication regulatory authority before the Interim Measures was promulgated. Due to the lack of detailed rules regulating the online consumer finance service and clarification of the nature of this innovative business model, the local telecommunication regulatory authority had tentatively put our applications on hold.

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We had ceased facilitating new loans with funding from individual investors on our platform since October 2019 and improved the business model through the acquisition of better quality borrowers and transition of our funding sources from individual investors to institutional funding partners. However, the interpretation of laws and regulations in the context of online consumer finance industry still remains uncertain, and it is unclear whether the online consumer finance service providers like Shanghai PPDai and Shanghai Erxu, are required to obtain the ICP License or the ODPTP License, or any other kind of VATS License. The regulatory regime of online consumer finance industry evolves rapidly. The regulatory authorities in the future may explicitly require any of our consolidated variable interest entities or their subsidiaries to obtain additional ICP Licenses, ODPTP Licenses, or issue new laws to institute a new kind of VATS License. We cannot assure you that we would be able to obtain the additional ICP License, the ODPTP License, or any new VATS License on a timely manner, or at all, which would subject us to the sanctions and materially and adversely affect our business, financial condition, results of operation and prospects.

In the opinion of our PRC counsel, Hui Ye Law Firm, our current ownership structure, the ownership structure of Shanghai Guangjian, Shanghai Shanghu, Beijing Paipairongxin and its subsidiaries, the ownership structure of Shanghai Manyin and Shanghai Zihe, the ownership structure of Shanghai Manyin and Shanghai Ledao, the contractual arrangements among Shanghai Guangjian, Shanghai Shanghu (with respect to the business operation agreement and the exclusive technology consulting and service agreement only), Beijing Paipairongxin, Shanghai PPDai (with respect to the exclusive technology consulting and service agreement only) and the shareholders of Beijing Paipairongxin, the contractual arrangements among Shanghai Manyin, Shanghai Zihe and the shareholders of Shanghai Zihe, and the contractual arrangements among Shanghai Manyin, Shanghai Ledao and the shareholders of Shanghai Ledao, are not in violation of existing PRC laws, regulations and rules; and these contractual arrangements are valid, binding and enforceable in accordance with their terms and applicable PRC laws and regulations currently in effect.

However, we are a Cayman Islands holding company with no equity ownership in the consolidated variable interest entities and we conduct operations in China primarily through the consolidated variable interest entities with which we have maintained contractual arrangements. Holders of our ADSs hold equity interest in FinVolution Group, our Cayman Islands holding company, and do not have direct or indirect equity interest in the consolidated variable interest entities and their subsidiaries. If the PRC government deems that our contractual arrangements with the consolidated variable interest entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. We may not be able to repay the notes and other indebtedness, and our shares may decline in value or become worthless, if we are unable to assert our contractual control rights over the assets of our PRC subsidiaries, which contribute to 83.9% of our revenues in 2022. Our holding company in the Cayman Islands, the consolidated variable interest entities, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the consolidated variable interest entities and, consequently, significantly affect the financial performance of the consolidated variable interest entities and our company as a group.

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However, our PRC counsel, Hui Ye Law Firm, has also advised us that there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations and there can be no assurance that the PRC government will ultimately take a view that is consistent with the opinion of our PRC counsel. For example, on March 15, 2019, the National People’s Congress enacted the Foreign Investment Law of the PRC, or the Foreign Investment Law, which came into effect on January 1, 2020 and replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. However, since it is relatively new, uncertainties still exist in relation to its interpretation and implementation. For instance, under the Foreign Investment Law, “foreign investment” refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other entities in China. Though it does not explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment activities under the definition in the future. In addition, the definition contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. On December 26, 2019, the State Council promulgated the Implementation Regulations on the Foreign Investment Law, which came into effect on January 1, 2020. However, the Implementation Regulations on the Foreign Investment Law still does not explicitly define whether contractual arrangement would be deemed as a form of foreign investment. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the State Council to provide for contractual arrangements as a form of foreign investment. In any of these cases, it will be uncertain whether our contractual arrangements will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations. Furthermore, if future laws, administrative regulations or provisions promulgated by the State Council mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations.

Although we believe we, our PRC subsidiaries and the consolidated variable interest entities comply with current PRC laws and regulations, we cannot assure you that the PRC government would agree that our contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. The PRC government has broad discretion in determining rectifiable or punitive measures for non-compliance with or violations of PRC laws and regulations. If the PRC government determines that we or the consolidated variable interest entities do not comply with applicable law, it could revoke the consolidated variable interest entities’ business and operating licenses, require the consolidated variable interest entities to discontinue or restrict the consolidated variable interest entities’ operations, restrict the consolidated variable interest entities’ right to collect revenues, block the consolidated variable interest entities’ websites, require the consolidated variable interest entities to restructure our operations, impose additional conditions or requirements with which the consolidated variable interest entities may not be able to comply, impose restrictions on the consolidated variable interest entities’ business operations or on their customers, or take other regulatory or enforcement actions against the consolidated variable interest entities that could be harmful to their business. Any of these or similar occurrences could significantly disrupt our or the consolidated variable interest entities’ business operations or restrict the consolidated variable interest entities from conducting a substantial portion of their business operations, which could materially and adversely affect the consolidated variable interest entities’ business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of operation of any of the consolidated variable interest entities that most significantly impact its economic performance, or our failure to receive the economic benefits from any of the consolidated variable interest entities, we may not be able to consolidate these entities in our consolidated financial statements in accordance with U.S. GAAP.

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We rely on contractual arrangements with the consolidated variable interest entities for a significant portion of our business operations, and such contractual arrangements may not be as effective as equity ownership in providing operational control.

We have relied and expect to continue to rely on contractual arrangements with the consolidated variable interest entities, namely, Beijing Paipairongxin, Shanghai Zihe, and Shanghai Ledao and, to operate our online consumer finance platform business, including the operation of www.ppdai.com website and PPDai mobile application and the provision of services to institutional funding partners, as well as certain other complementary businesses. For a description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.” These contractual arrangements may not be as effective as equity ownership in providing us with control over the consolidated variable interest entities. For example, consolidated variable interest entities and shareholders of consolidated variable interest entities as well as other parties to the contractual arrangements may fail to fulfill their contractual obligations to us, such as failure to maintain our website and use the domain names and trademarks in a manner as stipulated in the contractual arrangements, or taking other actions that are detrimental to our interests.

If we had direct ownership of the consolidated variable interest entities, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the consolidated variable interest entities, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance of obligations under the contractual arrangements by the consolidated variable interest entities, shareholders of the consolidated variable interest entities, and other parties to the contractual a