We are a leading online consumption and consumer finance platform for new generation consumers in China. The average age of customers who made transactions on our platform for the year ended December 31, 2020 is 25, with an average credit limit of RMB13,018. We provide a range of services including financial technology services, membership benefits, and a point redemption system through our Fenqile ecommerce platform and membership platform. We work with financial institutions and both online and offline brands and retailers to provide a comprehensive consumption ecosystem catering to the needs of young professionals in China. We utilize advanced technologies such as big data, cloud computing and artificial intelligence throughout our services and operations to better serve our customers. The use of these technologies encompasses our risk management and loan facilitation systems, which allow for the near-instantaneous matching of users' funding requests with offers from over 70 funding partners.
We strategically focus on serving the needs of new generation consumers in China between the ages of 18 and 36. These are the customers, we believe, with high income potential, more advanced educational background, higher consumption needs, a temporary mismatch between their needs and their income levels (which creates needs for consumption smoothing), a strong desire to build their credit profile, and an appreciation for an efficient user experience. In addition, we believe that new generation consumers in China will mature to become the primary group of consumers within the Chinese economy in the future. Our online ecommerce, consumption and consumer finance platform, Fenqile, addresses our users' needs by offering an array of products and services as well as credit lines. We offer a wide variety of competitively priced products on our e-commerce channel and allow users to directly use their credit lines to finance purchases. Through our Le Hua Card, we also enable our customers to connect their preferred payment tool directly to their credit line with us, allowing them to draw down directly from their credit line when they make each individual purchase. The individual loans that we provide to our customers are matched with diversified funding sources, which are primarily institutional funding partners in our lending programs. Our institutional funding partners include major Chinese banks, consumer finance companies, and other financial institutions and organizations.
From our inception in August 2013 through the end of 2020, we originated RMB446 billion (US$68.3 billion) loans to over 18.3 million users on a cumulative basis. In 2018, 2019 and 2020, we originated loans to approximately 4.9 million, 9.9 million and 12.9 million active users through our platform, representing a compound annual growth rate, or CAGR, of 62.5%. Our online consumer finance platform features a high proportion of repeat users. Of all active users on our platform in 2018, 2019 and 2020, approximately 80%, 81% and 86%, respectively, were repeat users who had made at least one transaction on our platform before in the same year or in the previous year. As of December 31, 2020, we had over 27.7 million users with an approved credit line and over 118.1 million registered users.
Our E-Commerce Channel
We launched Fenqile, our online consumer finance and e-commerce channel, in October 2013. The e-commerce channel on Fenqile offers competitively priced products across 27 categories with relatively high value, including electronics, fashion accessories, home furnishings and decor, used goods and outdoor apparel. The product offerings on our e-commerce channel are designed to specifically meet the shopping needs of new generation consumers. Our e-commerce channel features both direct sales of merchandise curated by us, as well as a marketplace through which third-party online merchants offer and sell their own products and services, such as leisure, travel and continuing education. On our online marketplace, user orders are placed and fulfilled directly by the third-party merchants. The GMV of our e-commerce channel amounted to RMB5.8 billion in 2018, RMB8.1 billion in 2019 and RMB5.3 billion (US$0.8 billion) in 2020. In 2020, we had provided over 4.0 million stock keeping units to our users.
We also extend credit to our users through our membership programs, such as Le Card, and cooperate with various online e-commerce platforms, merchants and online payment channels to provide instantaneous and accessible loan products to consumers. Users use their approved credit line to finance their purchases on our e-commerce channel. Approximately 26% of our users with an approved credit line as of December 31, 2020 had shopped on our e-commerce channel at least once previously.
The operation of our e-commerce channel is highly efficient because of our asset-light approach. Our strategic cooperation with business partners enables us to offer more competitively priced products, while requiring minimal capital, personnel and other resources. For example, we strategically cooperate with JD.com, a major supplier from which we acquire products for our direct sales business at competitive prices. We have achieved seamless connections of user order data with JD.com's platform. Pursuant to our annual sales agreement with JD.com, which may be automatically extended by another year, JD.com offers us products at exclusive prices and is also responsible for the delivery of product orders. We are responsible for the payment of product orders within 30 days of the purchase.
Furthermore, by leveraging the inventory and logistics capabilities of business partners such as JD.com and SF Express, we have been able to rapidly develop and grow our e-commerce channel without building our own fulfillment infrastructure for warehousing and delivery. We typically enter into annual contracts with our business partners for logistics services, which may be terminated upon advance notice at least 30 days. Our business partners agree to provide warehousing or delivery services to us, and we are responsible for the settlement of service fees typically on a 1-3 months basis.
Our New Initiatives
In light of the evolving needs of new generation consumers and the updates in consumption scenarios, we are also actively exploring new initiatives on top of our existing online consumption and consumer finance business.
Maiya. We launched our pioneering Maiya to enable customers to “buy-now, pay-later” (“BNPL”) for selected online and offline products with a 90-180 day interest-free period. For products offered through the Maiya service, customers will receive products and services instantly typically with a small upfront payment (representing 16-25% of the total purchase price) and repay the remaining portions of the purchase price in interest-free installments. Instead of charging interest to the consumers, we will charge the merchants with a service/facilitation fee for the products and services facilitated through Maiya. We believe that merchants will benefit from the Maiya service on our platform, which will bring them additional sales, higher conversion rates, and increased customer loyalty. Since its launch in January 2021, Maiya has generated a GMV of over RMB50 million (US$7.7 million) as of March 31, 2021.
Yuehui. We launched the Yuehui program on our Le Card membership and benefits program to offer customers discounts/rebates for certain products and services if their spending reaches a certain amount, or if they spend a certain number of times, within a contract period. This allows customers to enjoy the discounts associated with large cash prepayments without taking on the potential credit or bankruptcy risks of the merchants. Similarly, this enables merchants to lock in commitments and loyalty from potential customers who would otherwise be hesitant to commit to a large upfront cash prepayment. Contracting customers will enjoy a discount/rebate each time they make a purchase in the contract period. We believe it significantly encourages consumption, limits risk and also offers flexibility to our customers. For merchants, the Yuehui program also facilitates more transactions by lowering the spending threshold, encourages customer loyalty and matches long-term customers with the merchants.
Xiaofeihao. Leveraging the large user base and traffic of our Fenqile platform, we launched the Xiaofeihao on Fenqile as an innovative marketing channel for merchants to offer their products and services in new and attractive ways, such as through the use of short videos. Merchants can directly place links of their products and services on external e-commerce platforms. We believe that the large user traffic and high-quality consumers with strong ability for installment payments on Fenqile will make our Xiaofeihao an attractive marketing channel.
Our Membership Benefits and Partnership Programs
In 2019, we launched our Le Card membership and benefits program, which is offered on a separate mobile app. The Le Card app offers a wide range of savings, benefits and membership privileges across various retailers, products, channels, and brands, including but not limited to food and beverage, apparel, hospitality, and leisure. All of which are targeted towards serving our new generation consumers. Le Card allows our customers to access a wide variety of savings across different products, and also aggregates the loyalty programs across different brands and platforms to create a form of universal type point system which can then allow users to aggregate their points across loyalty programs between different retailers and brands. This in turn allows incremental benefits to the user and our retail partners, many of whom can be wary of working with larger ecommerce or retail players. As of December 31, 2020, we have 4.2 million Le Card users. In addition to the original Le Card program, we have a paid membership program, Premium Membership（超级会员）, offering premium services and additional discounts. As of December 31, 2020, we have 1.9 million cumulative Premium Membership（超级会员） customers.
Our Membership Benefits and Partnership Programs also allows us to increase our engagement with our customers, many of whom would utilize their credit lines with us to spend on channels outside of our Fenqile App. By increasing the number of consumption options that are available to our users, and increasing the benefits to our customers by offering benefits and savings from spending within the Lexin ecosystem, we can increase our engagement and understanding of our customers to better serve them. In addition, we can leverage this knowledge to help work with our retail partners to better target and serve both their and our existing customers.
Our Loan Products
On Fenqile, we offer credit lines to qualifying customers that can then be applied to a variety of uses, which we generally categorize as either personal installment loans or installment purchase loans. Our credit products provide our customers with competitive interest rates and flexible repayment solutions. All of our loan products are unsecured and feature fixed mont hly payments with various terms. In 2019 and 2020, we originated RMB126 billion and RMB177 billion (US$27.1 billion) in loans, representing a year-on-year increase of 40.3%. As of December 31, 2018, 2019 and 2020, the average user loan balance was RMB9,048, RMB7,829 and RMB8,125 (US$1,245), respectively.
We further expanded the use cases of our loan products in 2019 by offering the Le Hua Card, a virtual credit card which can be connected directly to our customers’ preferred payment solution provider, including Alipay, WeChat Pay, and UnionPay. By directly connecting the Le Hua Card to their preferred payment solution provider, customers can draw down on their credit lines with us as they are using it, as oppose to drawing down and obtaining a full personal installment loan first the full amount of which may not be immediately needed. Customers can therefore apply the use of the Le Hua Card to any offline and online sales where their preferred payment solution is accepted. This allows our customers to use their credit line directly for each individual, everyday purchase instantly at the point of sale. Unlike traditional credit cards, the Le Hua Card does not have an interest free period and interest will immediately accumulate upon the drawdown of the credit line. As each individual loan occurs at the moment of purchase, we are also able to track the specific use of each loan or drawdown from the Le Hua Card.
When a user is first approved for a credit line, the amount of credit line we offer ranges from RMB2,000 to RMB50,000 and the aggregate loan amount of personal installment loans and installment purchase loans borrowed by a single user may not exceed the credit line available to the customer. The credit line available to a customer, once approved, does not have a term limit. Based on our continuous risk monitoring and assessment, we may unilaterally adjust the amount of the credit line, change the percentage of the credit line that may be applied towards personal installment loans, or revoke the credit line. We may grant up to RMB200,000 credit line to existing users who have established a strong credit history with us. A customer may use the entire amount of in credit towards purchases on our e-commerce channel, but can only use up to a certain percentage of such credit line for cash advances or personal installment loans. The percentage which may be used for cash advances, personal installment loans, or the Le Hua Card may vary from 0% to 100%, depending on the results of the credit assessment. We had approved 27.7 million users for our credit lines or our Le Hua Card as of December 31, 2020. The average credit limit we granted to each user was RMB8,648 in 2018, RMB9,714 in 2019 and RMB12,850 (US$1,969) in 2020. The aggregate amount of credit lines approved by us was RMB91.0 billion as of December 31, 2018, RMB188 billion as of December 31, 2019 and RMB356.3 billion (US$54.6 billion) as of December 31, 2020, whereas the utilization rate, which is calculated as the percentage of outstanding principal balance relative to the total amount of credit lines approved by us, was 35.6% as of December 31, 2018, 32.2% as of December 31, 2019 and 21.5% as of December 31, 2020.
Personal installment loans
Users approved for our credit line are automatically eligible for personal installment loans with terms generally ranging from 1 to 36 months. Users can have multiple personal installment loans outstanding as long as the aggregated outstanding balance does not exceed the credit limit available for personal installment loans. Users may use personal installment loans to obtain cash or to finance purchases from third-party merchants on our marketplace through our e-commerce channel. With respect to the personal installment loans that are not borrowed to finance user purchases on the e-commerce channel, while we do not track the actual use of the loans, we do require the users to select in their loan applications one of the specified permissible uses of loan proceeds, such as education, cost of living or driving school expenses. Users approved for our credit line are automatically eligible to use the Le Hua Card.
We offer users who meet certain criteria, including user's credit profile and repayment history, flexible repayment options such as early repayment. These include the option to postpone their current monthly repayment to the next scheduled payment date or finance the repayment of a particular monthly repayment with a new loan. The flexible repayment options will not increase the available credit line for each user approved by us. We have set certain requirements for the use of flexible repayment options, such as minimum monthly repayments. We may adjust the features of the flexible repayment options based on credit performance and our risk management approach from time to time. The flexible repayment options are designed to assist those users who have relatively high consumption needs, and the willingness and ability to repay their loans. The new loans are newly originated personal installment loans at higher APRs than other personal installment loans.
The APR for personal installment loans currently ranges from 14% to 36%. In 2018, 2019 and 2020, the total amount of personal installment loans originated on our platform was approximately RMB63.3 billion, RMB122 billion and RMB174.6 billion (US$26.8 billion), respectively. The outstanding principal balance of these loans (including on- and off-balance sheet loans) was RMB75.2 billion (US$11.5 billion) as of December 31, 2020.
Installment purchase loans
A user approved for our credit line can use the available credit line to purchase a variety of products available for sale on direct sales on our e-commerce channel, subject to the approved credit limit available to the user. See “—Our E-Commerce Channel.” Our e-commerce channel enables us to track the users’ use of loans when they are borrowed to finance purchases on our e-commerce channel. We provide financing solutions to help our users finance a purchase by offering installment payment options with flexible minimum down payments ranging from 0% to 50% as well as various loan term ranging from 1 to 36 months, depending on the product, price, supplier and source of funding. Shoppers have the option to choose any combination of these terms, and our system will automatically calculate monthly payments and service fees. The APR for installment purchase loans currently ranges from 18% to 36%. In 2018, 2019 and 2020, the total amount of installment purchase loans originated on our platform was approximately RMB2.7 billion, RMB3.9 billion and RMB2.1 billion (US$316 million), respectively. The outstanding principal balance of installment purchase loans (including on- and off-balance sheet loans) was RMB1.3 billion (US$198 million) as of December 31, 2020.
Our loan pricing mechanism consists of two components, APRs and credit lines. We price our loans with different APRs based on different products to address product-related credit risks and as a function of market competition and supply and demand.
We primarily address credit risks by varying the amount of credit lines approved for each user. To enhance user experience, we seek to maintain consistency in terms of credit lines among newly acquired users in the same geographic area as they are likely to share their experience with each other. This approach is also consistent with the fact that the risk profiles of similarly situated users are largely homogenous and we utilize grouping as our primary method of credit assessment for new users. For the determination of credit limit based on the level of credit risks.
Our User Acquisition and Retention
We strategically focus on serving new generation consumers in China, or what we would term as the “New Generation” of consumers in China, who is our target user cohort. As of December 31, 2020, this target user group represented over 90% of our total user base. To date, we have successfully accumulated a large user base and achieved deep market penetration among new generation consumers in China by providing an online consumption platform that integrates high quality financial services, online and offline consumption scenarios, membership benefits, and an efficient customer experience.
We acquire customers primarily through three methods: (i) online advertising and related channels, including online platforms and Apps such as Douyin and Weixin, consisting of paid placements and advertisements that target our core users and help increase brand awareness and generates traffic, as well as non-traditional channels such as QQ Music, QQ Video, or iQiyi, where we provide memberships to the nontraditional channels for customers who successfully apply for credit; (ii) natural traffic, which consists of internet traffic generated from our brand recognition, as well as referrals from our existing customers, with a focus on referrals and benefits that are targeted and customized to the tastes and needs of our target group of new generation consumers; and (iii) our sales force and e-commerce channel which actively engage with new generation consumers by directly interacting with them on a face-to-face basis and by providing them with targeted products that meet their specific consumption tastes and needs. In addition, we also have an increasing number of partnerships and cooperation agreements with numerous offline and online retail brands, third-party e-commerce platforms, and commercial banks. As a whole, our marketing efforts are targeted based on the consumption and lifestyle needs and preferences of our target user cohort. As their tastes and preferences change, we may change or adjust our customer acquisition methods from time to time accordingly.
As our target user cohort is typically geographically concentrated and socially connected, we believe that we can obtain outsized returns on our marketing spending if we utilize the correct methods at the correct time. We focus on acquiring customers at stages when they are either underserved or unserved by other financial institutions. We focus on maintaining a customer acquisition cost of under RMB200 per customer based on internal marketing calculations, and we target to recover our customer acquisition cost per customer within three months.
As part of our continued engagement with our customers, our consumption platform and ecosystem provide access to a wide range of competitively priced products and benefits across both online and offline channels. We offer products and services across many diverse categories, including electronics, apparel, food and beverage, hospitality, used goods, and more. Our products and services are specifically designed to meet the consumption needs and preferences of new generation consumers and to provide our customers with greater benefits and savings. In addition, we offer credit lines often at preferred rates to enable our customers to finance their purchases, which improves engagement and contributes to our monetization.
Our financial institution customers, our “To-Bank” business
We offer a comprehensive set of solutions to our financial institution customers and partners that enable them to increase revenues, manage financial risks, improve operating efficiency, improve service quality, enhance collections, and reduce overall costs – thereby improving their operations, competitiveness, and profitability. Typically, we spent between 6 to 9 months with our financial institution customers in order to deploy and integrate their systems into our proprietary wormhole system. The integration is done to ensure that our lending customers are able to enjoy a seamless, immediate borrowing experience from our financial institution customers, while enabling our financial institution customers to be able to immediately assess the risk, approve or reject the credit, and provide the funding to our borrowing customers in real-time. In addition, where needed, we will help our financial institution customers enhance their existing credit system by building additional credit data analytic systems for them, sharing data, and assisting with developing anti-fraud and post-lending monitoring systems. This will enable our financial institution customers perform a second credit check in addition to the initial credit check performed by our proprietary Hawkeye system, and allow our financial institution customers to view the credit performance of the assets which we are providing in real time.
In addition, Lexin will handle all the collections and post-lending services for our financial institution customers, which will enable them to further reduce costs and improve efficiency.
Under Lexin's “profit sharing” model, our “To-Bank” financial institution customers can choose to generate potentially higher returns by setting aside the reserves or provisions for the loans facilitated on our platform. Doing so will enable our funding partners to generate additional returns for themselves of between X and Y. As of the end of 2020, over 50% of our total loan originations was through the “profit sharing” model.
Our Investors and Funding Partners
We benefit from our position of having diversified funding sources, including over 70 funding partners. We primarily finance the loans to users through the proceeds provided by third-party commercial banks, consumer finance companies and other licensed financial institutions as well as through the establishment of consolidated trusts and issuance of asset-backed securitized debts. We refer to these funding sources collectively as our institutional funding partners. We historically finance the loans to users through the proceeds provided by individual investors, the balance of which has been reduced to zero in line with regulatory guidance.
Currently, institutional funding provided by financial institutions such as banks and consumer finance companies make up the vast majority of our funding for our credit products. In 2020, institutional funding accounted for 100% of all our newly funded loans. Historically, our various investment programs and products were designed to cater to investors and funding partners with different risk-and-return parameters, and our investor investment programs and products formed a larger portion of our funding.