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Collapse of China's disgraced P2P sector offers important lessons

Online platforms forced banks to improve offerings but model wasn't sustainable

| China
An annualized interest rate cap of 36% has been painful for all but the most well-capitalized platforms like New York-listed Qudian.   © Reuters

In just five years, online non-bank lending has gone from a cutting-edge investor favorite to disgrace, scandal and collapse.

From LendingClub in the U.S. and Funding Circle in the U.K. to Chinese peers Dianrong, 51 Credit Card and Yirendai, they have all disappointed those who cheered them on, including me. They either keep racking up losses or are facing an existential crisis or both. In China, many P2P company founders have been jailed and the sector is facing bans from a growing number of local governments.

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