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The 5 trillion yuan online lending industry faces its toughest regulation yet, and Duxiaoman has no new story to tell

When the fourfold pressures of diminishing traffic dividends, frozen leverage, tightened ABS channels, and soaring customer acquisition costs converge, the growth flywheel that once relied on high interest rates to cover high costs and external financing to drive scale has ground to a halt.

Although the seventh season of 'Sisters Who Brave Winds and Waves,' sponsored by Duxiaoman, remains highly popular and widely discussed this spring, for the online lending industry, it's been a chilling season.

The recently announced 'Regulations on the Disclosure of Comprehensive Financing Costs for Personal Loan Business' (effective from August 1 this year) mandates the implementation of a 'comprehensive financing cost disclosure system' and strictly prohibits any additional charges related to loans beyond the disclosed items. In the past, platforms profited immensely from membership fees, review fees, and service fees, but this avenue has now been completely blocked.

In addition, last October's 'Regulation No. 9' (officially published as the 'Notice on the Management of Internet Loan Assistance Business for Commercial Banks' in October 2025) explicitly requires banks to independently manage risk control, caps the comprehensive cost at 24%, forbids platforms from charging borrowers, and mandates headquarter whitelist management, comprehensively sealing off the previous gray model where 'banks provided funds, platforms managed risk control, and charged high interest.'

These two heavy blows have squeezed the arbitrage space in the online lending industry to its limit, almost wiping it out entirely. What kind of impact are leading companies like Duxiaoman experiencing?

Are leading institutions facing greater impacts?

To understand the destructive power of this round of regulation, one must look back at the complete liquidation of the P2P industry in 2020.

Though P2P exited the historical stage that year, licensed online microloans quickly took over, transforming into a new form of the online lending industry—loan assistance. Over the past few years, leading platforms thrived after the collapse of P2P, essentially capitalizing on the window of regulatory arbitrage. Lexin (Fenqile), Xinye Technology (parent company of Paipaidai), Duxiaoman, Jiayin Technology, and Lingyue Technology all gained rapid development through this opportunity.

The logic behind the loan assistance model is straightforward: online lending platforms hold traffic and user data, secure funding from small and medium-sized banks, handle customer acquisition, risk control, and debt collection, while banks enjoy interest rate splits. On the surface, platforms charge technical service fees without bearing credit risks, appearing compliant and legal. However, most small and medium-sized banks lack independent risk control capabilities, outsourcing core functions like credit approval and risk management, reducing themselves to mere wholesale fund providers. Many platforms continued lending to users in lower-tier markets, pushing the actual annualized interest rates above regulatory limits through various pretexts such as membership fees, service fees, and guarantee fees.

Last October’s 'Regulation No. 9' and March's 'Regulations on the Disclosure of Comprehensive Financing Costs for Personal Loan Business' were precisely aimed at cutting the root of these issues. The main impact is evident in three areas:

Banks return to their role as primary risk controllers: In the past, many small and medium-sized banks outsourced core risk control. Now, commercial banks must independently conduct loan risk assessments and approvals, and are not allowed to outsource key processes such as credit approval and risk control to any partner institutions.

Next is the rigid cap on comprehensive financing costs: All fees related to loans, including interest, guarantee fees, insurance premiums, service charges, etc., are included in the comprehensive financing cost.

There is also a red line for interest rates of microfinance companies: In December last year, the People's Bank and the National Financial Supervisory Authority jointly issued the 'Guidelines for Managing Comprehensive Financing Costs of Microfinance Companies,' clearly requiring that by the end of 2027, the comprehensive financing cost of new loans issued by microfinance companies must be reduced to below 12%.

This red line almost redefines the industry's survival threshold.

Many people don’t know what 12% means?For microfinance companies that have long relied on high interest margins to cover risk costs, a large number of products will now face the dilemma of 'compliance equals losses.'

As early as August 2020, when the Supreme People’s Court lowered the judicial protection cap for private lending interest rates from 24% to 15.4% (then four times the LPR), some microfinance professionals noted in media interviews: 'If you factor in funding and operating costs, 20% is basically the break-even line for this industry, and this applies only to top-tier consumer finance companies with excellent operations.'

This means that once the 12% cap is fully implemented, it will leave a large number of institutions in a profitless deadlock.

Many people mistakenly believe that the new regulations only target small and medium-sized institutions, but on the contrary, top-tier institutions are more severely impacted.

Firstly, the larger the scale, the higher the compliance costs. The rapid growth of leading institutions in the past relied heavily on high leverage and extensive cooperation with institutional funds. The new rules reducing leverage mean that their 'scale myth' cannot continue. As the main source of funding for online lending platforms, banks have generally tightened cooperation since the end of last year. Urumqi Bank has completely halted the issuance of cooperative personal internet consumer loans starting October 1, 2025. Longjiang Bank’s sole cooperating institution disclosed in the list on November 5, 2025, was also marked as 'cooperation stopped,' while Weihai Blue Ocean Bank suspended 40 out of 68 cooperating institutions in the updated list in March 2026... Cutting off funding to online lending platforms is equivalent to cutting off their 'supplies.'

Secondly, there is dual pressure from both the asset side and the funding side. Leading institutions used to leverage very low self-funded ratios to sustain balances in the hundreds of billions. Now they not only need to increase their capital (with a 30% threshold) but also face the reality of banks tightening cooperation due to stricter regulation.

Moreover, the high-profit model between 12%-24% will be unsustainable. Many microfinance companies serve high-risk customers with annualized interest rates of 18%-24%, relying on aggressive debt collection to ensure repayment, forming a closed loop of 'high interest - high profits - strict collection - low non-performing loans.' This model appears efficient but operates at the edge of compliance; once regulations tighten, it can easily lead to difficulties.

Take Duxiaoman, which still sponsors S-level variety shows, as an example. Data from the Black Cat Complaints platform shows that Duxiaoman and its subsidiary 'Youqianhua' have accumulated over 90,000 complaints, mainly regarding excessively high interest rates, intimidation during debt collection, and unreasonable charges such as service fees and guarantee fees.

Several users reported that Duxiaoman's interest rate hovers around 23.4%, close to the judicial protection limit of 24%, with some exceeding four times the current one-year LPR. There are also complaints that after receiving 4,200 yuan, Youqianhua deducted service fees, prompting questions about whether this constitutes 'front-end interest.'

Our own tests by Lujiu Business Review found that while Duxiaoman advertises an approved interest rate of 6.12%, which falls within the low-interest range, some borrowers actually pay far higher rates than the advertised 'low-interest' standard. This 'high-interest covering high costs' model not only contradicts regulatory calls to 'reduce financing costs for the real economy' but also shifts risks to ordinary consumers.

The growth story is facing substantial challenges.

Lujiu Business Review found that in recent years, the number of microfinance companies has been decreasing. The latest data shows that as of September 2025, the number of small loan companies nationwide dropped to 4,863, with a loan balance of 722.9 billion yuan, and the cumulative loan balance decreased by 31.9 billion yuan in the first three quarters. The industry is undergoing deep adjustments and accelerating consolidation.

In fact, the industry's 'slimming down' trend has been ongoing for several years. The current number of micro-loan institutions has shrunk by nearly half compared to the peak of 8,965 in the third quarter of 2015, with loan balances falling over 200 billion yuan in the past decade.

Leading institutions like Duxiaoman may not be immediately shaken out, but their growth story is facing substantial challenges.

Not long ago, a list detailing layoffs at financial technology firms surfaced, claiming that a certain tech company reduced its workforce by about 30%, a well-known consumer technology team shrank from over 3,000 employees to around 200, and another firm cut approximately 10% of its staff while suspending lending services in some business lines.

The truth of these rumors aside, compared to 2024 and 2025, the industry’s expansion momentum has indeed weakened significantly.

Looking back, from 2021 to 2023, Duxiaoman's revenues were 3.018 billion yuan, 2.898 billion yuan, and 1.81 billion yuan respectively. By 2024, Duxiaoman's revenue reached 2.257 billion yuan, up 24.7% year-on-year; net profit surged an astonishing 306.1% year-on-year to 859 million yuan, equivalent to earning 2.35 million yuan per day.

However, upon closer examination, this growth was largely driven by one-off factors such as collections on existing loans and reversals of historical provisions, rather than substantial growth in core operations. In other words, it reflects more of the lingering effects of high-interest lending from recent years rather than sustainable future growth drivers.

Turning to the business structure, by the end of 2024, Duxiaoman Micro Loan's outstanding loan balance stood at 258.613 billion yuan. Consumer loans (Man Yi Loan), including co-lending models with trust companies and financial institutions, accounted for 241.124 billion yuan or 93.24%, with a non-performing loan rate of 1.09%. Business operation loans (Turnover Loan) totaled 17.489 billion yuan, accounting for 6.76%, with a non-performing loan rate of 0.89%.

This means that the vast majority of Duxiaoman's operations are still based on pure co-lending models in collaboration with licensed financial institutions like trusts and banks.This indicates that platforms must not only bear customer acquisition and risk control costs but also assume credit risks in joint lending arrangements. Especially now, with the requirement that self-funded contributions in joint loans cannot be less than 30%, this capital-intensive model sharply increases the depletion of capital, making the contradiction between scale expansion and capital replenishment increasingly acute.

Moreover, the high-interest customer base previously associated with co-lending platforms was precisely the main source of profits. Once interest rate caps are strictly enforced and high-yield assets are squeezed, platforms will either have to shift towards lower-risk customer segments (but where interest rates are lower and competition is fiercer) or watch their profit margins gradually erode.

Therefore, Duxiaoman's 'high profits' are a result of existing dividends, not growth confidence; 'high interest rates' and 'high profits' are both things of the past, not a moat.

In pivoting to overseas expansion and technology exports, Duxiaoman doesn't seem to have an advantage.

Nowadays, the red line for a comprehensive financing cost of 24% not only seals off pricing space but also forces platforms to reassess their customer base: continuing to serve high-risk customers results in an imbalanced risk-to-reward ratio; shifting to quality customers means facing the competitive pressure from bank credit cards and top-tier internet platforms.

As a result, going overseas (particularly to Southeast Asia) has become a consensus among leading loan assistance platforms. Southeast Asian markets (Indonesia, Philippines, Mexico, etc.) have relatively relaxed regulations, with interest rate caps far higher than domestically, and low financial penetration, offering clear room for growth.

However, Duxiaoman’s overseas expansion only noticeably accelerated in the last year or two. According to Lujiu Business Review, in the second half of last year, Duxiaoman posted recruitment ads in multiple locations, preparing to hire staff for cash loan-related businesses in Mexico and Indonesia.

By comparison, Xinye Technology (Paipaidai) began its overseas expansion as early as 2018, with platforms such as Batumbu in Indonesia and JuanHand in the Philippines already well-established, and overseas revenue consistently accounting for over 20%; Jiayin Technology (Jierong) has also been active in Africa and Southeast Asia for years; Yoyo Wallet under Kunlun Wanwei has similarly developed overseas markets deeply for years.

At this stage, several Southeast Asian markets are showing signs of license saturation, skyrocketing customer acquisition costs, and regulators beginning to tighten similar to domestic measures. Although Mexico hasn’t officially announced tightening, early movers have built up localized operation barriers, meaning latecomers will need to pay a higher price. Thus, being 'late' is not just a timing issue but also means missing the window for regulatory arbitrage.

Moreover, Duxiaoman has been rumored several times over the past few years to have plans for an IPO. At that time, the capital market's valuation logic for consumer finance or loan assistance platforms generally followed the 'traffic + capital + technology' triad model, but what truly mattered were the first two—traffic determined customer acquisition cost advantages, and capital dictated expansion speed.

Today, neither narrative holds water. The traffic dividend has peaked; although Duxiaoman benefits from Baidu's traffic, Baidu’s own search traffic landscape is being restructured, and the conversion efficiency of targeted financial traffic continues to decline. Leverage on funds has been locked down; the 'Rule No. 9' directly cut off the path to exponential growth, making the previous 'doubling in one year' growth curve a thing of the past.

With both core variables of traffic and capital now constrained, Duxiaoman can only return to the single narrative line of 'technology.' But this time, technology is no longer a mere embellishment—it must become the pillar supporting the entire valuation. Duxiaoman’s ability to export technology lies in whether it can provide risk control systems and SaaS platforms to small and medium-sized banks and consumer finance companies, determining whether it can shift from 'asset-heavy credit business' to 'asset-light technology services.'

It may get harder next.

Duxiaoman's advertisements once occupied prime spots at major airports nationwide. Previous media commentary noted that wherever there is traffic, Duxiaoman places its ads.

Recently, the seventh season of 'Sisters Who Brave the Waves' premiered, and as expected, Duxiaoman once again became the exclusive title sponsor.

The lack of application scenarios is Duxiaoman's biggest weakness. Others can rely on their ecosystems to acquire customers, but for Duxiaoman to maintain growth, it has no choice but to depend on continuous exposure. Buying traffic is the most effective way to sustain growth. Previously, Duxiaoman also sponsored popular variety shows such as 'HaHaHaHaHa 5' and 'Cats in the Box 2,' as well as TV series like 'Lychee from Chang'an' and 'Joy of Life.' It even titled marathons, concerts, and football events.

According to statistics from EntGroup’s Content Intelligence, in the first quarter of 2025, Duxiaoman's total exposure time reached 38,977 seconds, ranking third among internet brands and first in the internet finance sector.

Last year, the Shanghai Securities News cited industry insiders: Over the past five years, customer acquisition costs for loan facilitation agencies have increased sixfold, with new customer conversion costs reaching nearly 3,000 yuan at their highest. This cost ultimately needs to be covered by loan interest, thus creating a vicious cycle where higher customer acquisition costs lead to higher interest rates; higher interest rates attract lower-quality customers; and lower-quality customers make risk control more difficult.

On the other hand, Duxiaoman has been quite aggressive in expanding its funding sources. Since last year, the pace of its issuance of ABS (Asset-Backed Securities) has significantly accelerated, with two ABS issuances approved for Duxiaoman in June and September 2025.

ABS has become an important financing channel for fintech companies like Duxiaoman. Simply put, Duxiaoman can package the installment payments owed by users into securities products and sell them to investors, thereby quickly recouping funds to continue lending. As of the end of 2024, Duxiaoman had 27 outstanding ABS/ABN products across major exchanges, with a combined balance of 24.538 billion yuan.

However, this financial maneuvering is ultimately a temporary fix rather than a long-term solution. Without scenario support, the larger the scale of lending, the more reliant it becomes on external financing to fill gaps. Industry insiders revealed that starting from the end of 2025, some consumer finance companies received regulatory guidance, and consumer finance companies might suspend the issuance of ABS and financial bonds. Approved but yet-to-be-issued products will also be suspended. A search on the Shanghai Stock Exchange's official website by Lujin Business Review found that two ABS projects of Duxiaoman, each worth 5 billion yuan from December last year, are still under review and have not passed yet.

Relying on ABS for capital turnover and only able to drive user growth through heavy spending, Duxiaoman may face greater difficulties ahead.

Written at the end

Ultimately, the predicament faced by Duxiaoman is not an isolated case but rather a microcosm of the entire loan assistance industry transitioning from 'regulatory arbitrage' to 'compliant operations'.

When the fourfold pressures of the retreat of traffic dividends, the locking of capital leverage, tightening ABS channels, and rising customer acquisition costs converge, the growth flywheel that once relied on high interest rates to cover high costs and external financing to drive scale has ground to a halt.

For Duxiaoman, the real way forward may not lie in spending more money to buy traffic or issuing more ABS to sustain operations, but in answering a more fundamental question: without scenarios, ecosystems, or沉淀of proprietary funds, how far into the future can a single risk control technology support?

Now, with the industry on the verge of significant adjustments, Duxiaoman's airport advertisements have not stopped. Is this surface-level prosperity, or (given the premise of no immediate IPO plans) is it necessary to spend the money that must be spent?

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