Yiren Digital at Deutsche Bank Conference: AI and Global Expansion Drive

On Thursday, 15 May 2025, Yiren Digital (NYSE:YRD) participated in the Deutsche Bank ADR Virtual Investor Conference. The company outlined its strategic initiatives, highlighting a 19% revenue growth in 2024 and a focus on AI integration and international expansion. However, it also reported a 24% decline in net profit due to one-off revenue in 2023 and regulatory challenges.

Key Takeaways

• Yiren Digital achieved a 19% year-over-year revenue growth in 2024, reaching RMB 5.8 billion.
• The company is focusing on AI to improve borrower acquisition and risk management.
• International expansion is a priority, with significant growth expected in Southeast Asia.
• New economy embedded insurance products are projected to account for 50% of insurance revenue by 2027.
• Yiren Digital plans to increase its dividend payout ratio, having already raised dividends by 10% in Q4 2024.

Financial Results

• Revenue and Profit: 2024 revenue totaled RMB 5.8 billion, a 19% increase from the previous year. Net profit fell by 24% to RMB 1.6 billion due to a previous one-off revenue boost and regulatory issues.
• Loan Origination: The total loan origination volume in 2024 was RMB 53.5 billion, marking a 49% increase year-on-year. A 12% growth is projected for 2025.
• Dividend Policy: Dividends were increased by 10% in Q4 2024, with a payout ratio of 20%.

Operational Updates

• AI and Technology: Yiren Digital has received regulatory approval for its language model, Zhiji, and invested in nine AI startups. These initiatives aim to enhance operations and technology services.
• Expansion in Southeast Asia: The company entered the Philippines market in 2023, with revenue doubling in 2024. A joint venture in Indonesia is set to launch in Q3 2025.
• Insurance Business: The launch of an enterprise drone insurance product in China is expected to generate RMB 400 million in premiums by 2026.

Future Outlook

• International Expansion: Yiren Digital aims to grow overseas revenue to 10% of the total by 2026 and 15% by 2027.
• Technology Revenue: The company will begin reporting technology revenue separately from Q1 2025.
• Insurance Segment: The insurance segment is expected to turn around in the second half of 2025, with a shift towards embedded insurance products.

Q&A Highlights

• Global Expansion: Yiren Digital is exploring new markets, including Mexico and the Middle East, to expand its international footprint.
• AI Products: AI will be integrated into marketing and office automation to enhance efficiency.
• CreditEase Relationship: As the parent company, CreditEase collaborates on technology development and customer acquisition.

In conclusion, Yiren Digital’s participation in the Deutsche Bank ADR Virtual Investor Conference provided valuable insights into its strategic direction and growth prospects. For more details, readers are encouraged to refer to the full transcript.

Full transcript - Deutsche Bank ADR Virtual Investor Conference:

Zaf Raziz, Deutsche Bank Team, Deutsche Bank: Hello, and welcome to the Deutsche Bank Deposit Receipts and Version Investor Conference, DBVIK. I’m Zaf Raziz from the Deutsche Bank team. I’m pleased to announce our next presentation will be from Yiren Digital Limited. Before I introduce our speaker, a few points to note. Please submit your questions in the questions box.

All today’s presentations will be recorded and can be accessed via the Deutsche Bank website, adr.db.com. At this point, I’m very pleased to welcome Eurin Digital Limited who trades on the NYSE using the symbol YRD.

William Hui, Senior Vice President of Capital Market, Yiren Digital: Good morning or good evening depending on where you are. My name is William Hui. I am the senior vice president of a capital market at Yuan Digital based in Hong Kong. Yuan Digital is a leading Asian consumer finance company headquarters in Beijing. We are growing rapidly in Southeast Asia, and we are listed in 2015 at the New York Stock Exchange with a ticker symbol YRD.

Our business is largely driven by domestic consumption, which is more resilient to a geopolitical tensions or to trade war. Our growth is built on solid performance from our core business in consumer lending and insurance brokerage. We use part of the cash flow from the core business to fund the growth of our new business. Recently, we have invested heavily in technologies to improve our internal efficiencies. We have also successfully monetized these technologies through various technology service contracts to institutional clients.

We increased our dividends in Q4 twenty twenty four by 10%. Our dividend yield stands at 6.75% and we will continue to reward our shareholders as we review our dividend policy this year. So let’s talk about the industry. The per capita consumption is in China is projected to grow at about 4% per year in the next five years. The consumer finance market is growing even faster and is expected to reach about 3,500,000,000,000.0 US dollar by long volume by 2027.

So that represents 7% CAGR. The outstanding loan balance will reach 8,100,000,000,000.0 RMB by 2026, and that’s 5.7 times of 2017 figures. The growth is driven by the government’s stimulus policies, the AI technologies that makes access to loan easier for consumers, and also some industry consolidations. So what is Yiren Digital? We are listed since 2015 and we have been doing lending for nineteen years.

We have accumulated nineteen years of data to make lending more efficient efficient and safe. The significant part of the business is consumer finance, building on strong cash flow from this business. We have developed our insurance brokerage business and used the AI to make operation and customer experience more efficient. Our 2024 revenue was RMB5.8 billion or 800,000,000 US and the operating cash flow is RMB 1,400,000,000.0 or 200,000,000 US dollar. So let’s talk about our three main business lines.

Our financial services uses technologies to optimize borrower acquisitions and retentions, risk managements, and debt collections. On the insurance brokerage, we are building on solid customer base and are leveraging our relationship with our asset management partners and insurance carriers to develop new embedded insurance product to the market. On the Lifestyle segment, we offer suite of investment products, insurance solutions and non financial products to our high end customers. So we will get into a detail of each business segments. For the financial services, our target customers are the people at the age of 25 to 40.

In this age group, most customers have decent jobs or self employed with a stable income. This segment has the highest credit qualities and the largest appetite for borrowing. So we estimate there are about 734,000,000 potential customers in this market. Our digital first technology strategy leverages optimization algo in consumer acquisitions through omni channels, better risk management, and customer services. The average loan size is $8,000 RMB or roughly about $1,100 US.

Our total loan facilitation in 2024 was 53,600,000,000 or 7,500,000,000.0 US dollar. The number of repeated borrower is also increased by 10% year on year. So here’s the business model. The financial institutions like licensed banks, asset management companies provide capital to us as their operation is not cost cost efficient enough to lend small ticket size loan to consumers. So it makes sense for them to provide a wholesale capital to us, and we help them to deploy the capital and generate higher risk adjusted return than the average loan book.

So we charge a service fee and will provide all services required to produce return to investors. So this include borrower acquisitions, credit analysis, risk management, customer service, and debt collection. The funders are also paying us for the technologies to help them to be more sophisticated in formulating their credit decisions. So our consumer finance platform, Yixinhua, uses social media such as TikTok, WeChat, or Weibo to interact with the customer and and for customer acquisition and engagement. The average loan size, as mentioned, about it’s about 7 to $8,000 RMB, and the loan tenure is three, six, nine, or twelve months.

So we use AI extensively in our workflow starting from borrower acquisitions where our system will filter sales lead that give us the best conversion based on our proprietary model. Our internal operation and customer services use our own language model as Zhiji to give the best digital experience to our customers. Our fraud detection model is trained by over 800,000,000 lines of proprietary customer data in the past. For for debt collection, model studies the borrower’s digital behavior and find the right time during the day to reach out and design a repayment plan that works for them. Our risk management is a combination of nineteen years of experience and use of AI technologies and over a hundred engineers from the companies in our parent group.

The combinations of a human know how and the technologies allow us to license our technologies to our funding partners as they develop their capabilities in other business such as wealth management. So while China is our biggest market, but we are actively expanding to overseas market that give us a higher return on capital. We enter into Philippines in 2023. Our 2024 revenue from the regions is already doubled year on year, and it achieved profitability and positive cash flow after fourteen months of operations. In Indonesia, we signed a JV agreement with AG Group in the countries in March.

We expect to start the service in q three this year. So that with these three countries, we already cover a a quarters of the world’s populations. So we will continue to explore opportunities in different markets for better diversification and growth. So for our technologies, we are already monetizing our consumer lending technologies to help our clients on improving target marketing, credit risk managements, and customer services. So last month, we received a regulatory approval for our own language model, Zhi, based on the existing model from DeepSeek and Lama three.

It is built for enterprise applications such as meeting managements, note taking, tax form analysis, legal contract analysis, and so on. So we will incorporate Zhiji into our technology service offering. We have also invested in nine AI startups to accelerate our AI innovations on things such as video content generations, that collection technologies, and digital twins. One of the key r and d focus is the AGENT AI, which we believe will revolutionize the way the enterprise operates. We will make some key hiring on the technologies to keep up our innovations.

So let’s talk about our insurance segments. Our platform has over four fifty agents, 30 branches in China. So we partner with 95 insurers. So we focus on high commission and long term revenue from a stable client base. On the personal insurance side, we sell traditional life and health insurance.

On the corporate side, on top of the traditional properties and casualty and and a general insurance products, we design and sell products to cater unique business scenarios. So recently, we are targeting new scenario types such as such as the drone economy, climate change protections. We work with our private equities and venture capital partners to develop and promote and better insurance products for their portfolio companies. So altogether, we have hundreds of companies on the pipeline we can work with. So here are some of the embedded insurance products that we recently launched.

So we are targeting for a high margin proprietary custom built insurance product for the new economies. So in March, we launched the first enterprise drone insurance product in in China. It covers the entire drone fleet from loss due to signal interference, power outage, and a weather damage. The margin is much higher. It’s about two times the margin of a traditional product.

So so far so since March, we had four signings already, and we target the gross premium to be to reach about 400,000,000 RMB in 02/2026. So other ideas we are working on include climate change insurance for agriculture industries and and cyber securities. So we use a lot of AI in the customer journeys from target marketing, initial engagement, automating process to smoothen the KYC experience. Our technology automate claim processing and it identifies the coverage gap and handles the customer complaints. Because of the AI and our people, we are able to move very fast in in the markets on the product innovations.

So lifestyle business is a premium membership tailored for affluent customers to give customer access to high touch investment products. We initially use it as a loyalty program for our insurance and lending customers. The customer the retention rate is very impressive at 98%. So we recently extended our product offering to luxury products virtual goods. We will continue to expand more product that give us a healthy margins.

So for future growth, we continue to ride on a solid foundation and sustainable cash flow from our domestic business while creating new products and monetization of our technologies. The technology revenue will become big enough this year that we will start reporting the revenue separately from Q1 this year. Also, we will continue to push our internationalization strategies. We target to grow our overseas revenue to 10% of total by 2026 and fifteen percent by 2027. So let’s look at the financial.

The total loan origination volume in 2024 was 53,500,000,000.0 RMB, so representing 49% growth year on year. So we expect the origination volume will grow at about 12% in 2025. That’s remarkable number consider our competitors are forecasting a negative growth in origination in origination this year. The repeated borrower percentage will increase from 65% to 70% in 2025. This will have a positive impact on the borrower acquisition cost and risk management as repeated customers are cheaper to retain and their risk profile is more visible.

The delinquency rate continue to improve because of a better macro environment and better debt collection efficiencies and a higher borrower mix from repeated borrower as previously mentioned. So for the overall financial 2024 revenue was RMB5.8 billion That represents a growth of 19% year on year. Net profit was RMB1.6 billion, so it’s down 24%. The decrease is because in 2023, there was a RMB400 million one off revenue from the insurance segment. And 2024 and also in 2024, the insurance revenue decrease also decreased because of a regulatory headwinds on the commission cap.

So we are in the middle of transition in the business to shift from a selling traditional product to a higher margin embedded insurance products that are supported by the government. The insurance segment, we we expect the insurance segments will turn around in the second half of twenty twenty five as we are pivoting to more embedded insurance model. For the revenue contributions, we expect the technology revenue will begin to generate revenues. We will focus on growing that revenue as well as the revenue from the lending business. On the insurance side, we signed four drone insurance contracts in March and April.

We also launched a retirement savings calculator app in March for pay subscriptions to external wealth managers for sales support and lead generations. The revenue from these new products will offset some of the revenue slowdown from the traditional product for the insurance. So we aim by 2026, these new economy embedded insurance product will contribute to about 25% of the total insurance revenue in in 2026 and by and 50% in 2027. So finally, for the share price, we have a higher growth trajectory than our peers, but our share price has been trailing behind our peers. But there are lots of excitement going on to our business starting from the launch of our language model Z, expanding into Indonesian market and more technology monetization.

So we hope we will deliver more value to our shareholders. So that’s the end of my of my formal presentation. So so I will go through some of our questions. So, okay. So, there’s one question about can you expand on the global expansion strategies with comparison with your competitors?

Yeah. So if we compare with our competitors like Qifu and and Nursing and and Finis. They are I think they are about two or three years ahead of us in our in their international expansion. So so they are in they’re already in Indonesia, Philippines, and and Mexico, and Thailand. So so we are already in Philippines, and we’re doing very well in Philippines.

And we just signed a j JV agreements in Indonesia, so we will start operating in q three this year. And we are exploring the other market So and we are we are testing the Mexico market as well, and we are exploring the other license another potential license in other countries such as The Middle East. So the next question, the for the international expansion, I’ve been to date any color on the expand expectation for growth and profitability in this segment? So to begin with, we started the the Philippine business in 2023.

As mentioned, in 2024, we have doubled our revenue. And and we expect the the revenue will will will double again this year. And in overall, so we expect this year the the revenue from the overseas market will will account for about 4% of the total. And for next year, we expect it will grow to 10%. So the next questions, are there still plan for commercially useful AI product?

What would that look like? Yes. We I think our AI product will not be standalone AI product. It will be integrated into the applications or the technology that we use internally day to day on things like the target marketing, how we optimize the the client acquisitions, and also the other office automation tools that that we are testing right now. So so we hope to as we got the approval for Zhiji last month, so we hope to to make these two smarter with the AI capability.

Okay. The next questions. Any expectation around the insurance brokerage ability to return to 2023 level of profitability following the regulatory change that took place? Yeah. For traditional products, we expect we will continue to face the the regulatory headwinds on on the commission cap.

But I think but but but we are in the process of of pivoting our business model toward more custom products and the embedded insurance product, will give us higher margins. So and there will be some investment period. And and as we see, we are seeing some result from our drone insurance, and and and we we hope we can scale up the this product and also the other climate change product that we are developing this year. Next questions. Sorry.

I’m just jumping through that. How does the AI help in in our risk management? That’s a that’s a good question. I think for for AI based on the 800,000,000 lines of data, we did did a few things that help us on the risk management. One is the fraud detections.

And and with the the user behavior patterns, we are able to to identify fraud about three times as much as the traditional model. And and also based on the demographics and and the users data, so we are able to identify to to classify the the credit ranking for for the individuals. So this will help us on on the risk management and the and the customer acquisition as well. So can you elaborate on your investment initiative on Southeast Asia? Why is Southeast Asian market?

I think it’s similar to our competitors. I think the the consumer finance or consumer patent spending patent in Southeast Asia is very much similar to to China Ten Years ago. And for in the market of Philippines and and Indonesia that we that we operate, there’s a commonality for them for them is that there’s a significant portion of their populations do not have a bank account, and and and and the access of the credit has been very difficult. So that give us the opportunity for us to expand into into this area. And and also the this in Southeast Asian market is with respect to the consumer finance is very similar to China.

So we can leverage our existing technologies and the know how that works in China and apply to to Southeast Asia. So what is your growth drive for loan facilitation given the overall weakness of the industry? I think for the growth drive, as we see some of the competitors, we are we we will try for higher repeated borrower. So that will give us the higher loan growth and also a better more visible profile. So we expect the loan facilitation will grow by 12% and it will still stand high at historical growth at 2025.

Okay. Let’s go show soon. Sorry. Just going to the okay. So can you please ex discuss the question is, can you please discuss the relationship with CreditEase?

How does CreditEase do? And are there any services that you and digital provide to CreditEase and vice versa? Well, we work with CreditEase well, CreditEase, first of all, it’s our parent companies. And and we work very closely with them on the technology development. And and they have they have about 200 engineers on on their on their platforms, and and we collaborate with them on the technology developments.

And also and and we also share some of the the customer acquisitions flow with them as well. So so I think we we we work very collaboratively on on the on the loan and the on the landings and and the insurance side. So what is your so the the next question, what is your dividend policies and expectations for 2025? So we increased our dividends by 10% last year, and and our dividend payout so far is at 20%. And we will review our cash flow and and and we and we may consider increase that review that ratios alongside with the our competitors in the industry.

I think we are almost time. So I I see there’s still a lot of questions on on the list. So I will address those questions offline if you leave your contact information to Deutsche. So we are also available by email and as you see on the screen my our contact information. So thank you very much for your time.

Thank you.

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