CFO INTERVIEW: 360 Finance Enjoys a Steady IPO Despite Market Turmoil

author: Peter H. Frank   

In the midst of a rough market, 360 Finance Inc. (Nasdaq: QFIN) held its own today as the company completed its initial public offering at $16.50 per share and ended the day unchanged in New York trading. 

While the U.S. markets overall dropped 2 percent and warnings continued to be sounded about the Chinese economy, this leading digital consumer finance platform based in Shanghai raised $51 million by selling 3.1 million American depositary shares. 

The company, a subsidiary of 360 Security, a $20 billion anti-virus software firm, operates an automated decision-making platform that evaluates applications for loans typically used for consumer spending. Backed by Qihoo 360 Technology Co. Ltd., it primarily matches underserved borrowers with the company's funding partners. Since its founding, the company has facilitated more than $13.7 billion in loans to 6.4 million borrowers. 

For the third quarter alone, the company originated roughly $3.9 billion in loans, representing an 80 percent compound quarterly growth rate. It collected more than $90 million in revenue in those latest three months and recorded nearly $15 million in net income.

CapitalWatch caught up with the company's chief financial officer, Alex Wu, after the company's IPO today. 

CapitalWatch: Thank you for taking the time today, and congratulations. 

Alex Wu: It's an exciting day. 

CW: Your stock price seems to be holding steady today, which is better than a lot of the companies in recent months.

Wu: Thank you, yes, the market overall is under pressure.

CW: Why did you pick now, why did you pick this time, to do an IPO?

Wu: It's a good question. Actually, we didn't pick the time. We just do our job and try to get everything done. When it happens, it happens. That's it. So we didn't pick the time. As one of our business strategies of going forward, we want to get listed. Going public is just part of our strategy.

CW: How does this help the strategy? How is this part of your strategy?

Wu: As a FinTech company, you need a brand name to win the trust of financial institutions, partners and consumers. So as a listed company, you will easily get that kind of trust to some level. That's one of the key factors in doing the IPO. The other thing is, from the business perspective, we want to get it done before top-tier platforms go public so that we will have the strategic advantage for business operations.

CW: Given the experience of the industry, which has had several challenges over the past year, how are you differentiating yourself from the others you competing against?

Wu: First of all, we don't think we are competing directly with them, because the market is really huge. Secondly, I think the differentiating point is we are a technology giant-backed FinTech company. We are different than those independent platforms which have no big names to back their operation. We regard ourselves as one of the kind including Ant Financial, WeBank, JD Finance and some other big names. That differentiates us from those existing listed FinTech companies.

CW: The ones you name, you regard them as your direct competitors?

Wu: Again, the market is enormous. From the business perspective, we haven't seen direct competition yet.

CW: You mentioned in your F1, the 500 million monthly active users, 1 billion mobile devices, this is the power you have through the 360 Group. Would you say that is your primary differentiating benefit you have?

Wu: That is one of the most important advantages we do have. That is why we say we are technology giant-backed FinTech company.

CW: Every company says they use artificial intelligence. So, when I see you also use AI, I think what's the difference? Your platform, 360 Jietiao, how is this product and your AI different from the industry?

Wu: That's a very good question. I am not a technology guy. I am more of a financial guy. My understanding is, no matter what you call it, the size of the database determines the output. That's the differentiating point for us from other FinTech companies. We have this technology giant company backing us. So, they have an enormous database for us to cross-reference. To my understanding, that is the key point for our AI technology application in FinTech.

CW: As a finance guy, then, let's talk about your funding partners, because you appear to have more institutional funding partners in contrast to the typical P2P players that go directly retail-to-retail.

Wu: You asked the perfect question we want to answer. We are definitely different from any P2P company. Basically, we are not a P2P company. We connect those financial institutions with consumers. Those financial institutions normally won't work with just anybody. We work with brand names. That is our advantage in terms of funding. We have stable funding from those financial institutions. As time passes by, as long as the asset performance shows on their balance sheet, they will feel more and more comfortable about working with us. So that gives us advantages to serve more consumers.

CW: So, now you have $50 million and you have a new year coming up, what does your year look like? What do your plans look like?

Wu: For this year, we do see a very good and healthy growth for operations and financials. The numbers you see on the prospectus, for example, the loan outstanding balance last year, we only had 12 billion [yuan] balance, but for now we have roughly 36.4 billion [yuan]. You can see the huge jump, so this year it's really good. Going forward, we see the momentum will continue, but we can't give any guidance right now, because we need to think thoroughly before we give any guidance to the market.

CW: Last question, please You see the stock performances of the FinTech companies haven't been very attractive or strong over the past few months. Do you have any worries or concerns for your company's stock performance?

Wu: Thank you for putting it in a subtle way. We do have some observations. but for me and our management team, we are focusing on our business. We think the stock will speak for itself as long as we deliver operations. If we deliver everything we promised to the market, to all shareholders, our share price is the last thing we need to worry about.