Mainland Chinese tourists take pictures during a cruise on the River Thames, central London. Photo: Reuters/Paul Hacket
Mainland Chinese tourists take pictures during a cruise on the River Thames, central London. Photo: Reuters/Paul Hacket

China is experiencing a surge in two key consumer areas – credit-backed spending and demand for overseas travel. One Shenzhen-based fintech startup has launched a new service that combines both of them.

Financial technology firm Lin Bao You allows consumers to book packages online for international trips, including flights, hotels and sightseeing, and pay later in monthly instalments. The business is a collaboration with one of the country’s largest travel agents, Beijing-based China Comfort Travel Group (CCT).

“Travel behavior among today’s young people is different from the older generation. They don’t want to save up before traveling. They make fast decisions and want to travel now,” said Sean Guan, founder and CEO of the company.

Sean Guan, founder of startup Lin Bao You, with wife and fellow startup entrepreneur Mimmie Li, in Shenzhen. Photo: Johan Nylander

China’s booming market for financial technology services has in a short time put increased pressure on traditional banks as consumers turn to more convenient ways of paying, such as Alipay and WeChat Wallet, as well as borrowing.

Read: Fintech boom driving cashless China

Lin Bao You has access to 500 million yuan in capital for client credit, Guan said.

Guan is also co-founder and former CEO of one of China’s most popular stock picking services, Qian Da Ren, which had about 800,000 paying subscribers at its peak last year.

In an interview at Lin Bao You’s office in one of Shenzhen’s busy high-tech parks, Guan said that CCT aims to increase revenue by 40% once the service is rolled out through its thousands of branches nationwide and on social media platforms. CCT is one of the investors in Lin Bao You, alongside venture capital firm Zhong Ye Xing Rong.

CCT already sells 10 billion yuan (US$1.4 billion) of travel packages a year, with 54% of revenue coming from trips abroad, Guan said. He added that CCT,  a subsidiary of state-owned Beijing Tourism Group, plans an IPO within the next two to three years. CCT hadn’t responded to an email seeking comments by the time of publication.

“We aim at young travelers who enjoy quality lifestyle. They have the capability to spend, but also to pay back credit,” Guan said.

So what happens if people buy a travel package, but don’t pay? China is experiencing a boom in credit-backed consumption which analysts fear could lead to a spike in personal debt from overspending, especially for the young.

Bad debt is an inevitable business risk, Guan said. But he added that is also a potential source of income as the firm can sell a “black list” of people not paying to financial institutions. He can also sell a “good list” of quality clients.

Globally, one in 10 international travelers comes from China. The number of Chinese traveling overseas has more than doubled to 120 million over the past five years, according to the China National Tourist Office. That number is expected to almost double again by 2025 to 220 million. Chinese tourists spent US$215 billion abroad last year, 53% more than in 2014, according to a report from the World Travel & Tourism Council.