Hello, ladies and gentlemen. Thank you for participating in the second quarter 2022 earnings conference call for FinVolution Group. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded. I will now turn the call over to your host, Jimmy Tan, Head of Investor Relations for the company. Jimmy, please go ahead.
Hello, everyone, and welcome to our second quarter 2022 earnings conference call. The company results were issued via Newswire Services earlier today and are posted online. You can download the earnings release and sign up for the company's email alert by visiting the IR section of our website at ir.finvgroup.com. Mr. Feng Zhang, our Chief Executive Officer, and Mr. Jiayuan Xu, our Chief Financial Officer, will start the call with their prepared remarks, then conclude with the Q&A session. During this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and reconciliation to GAAP measures, please refer to our earnings press release.
Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company's filings with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Finally, we post a slide presentation on our IR website, providing details of our results for the quarter. I will now turn the call over to our CEO, Mr. Feng Zhang. Please go ahead, sir.
Thanks, Jimmy. Hello, everyone, and thank you for joining our earnings call. The second quarter of 2022 was a challenging quarter, with Shanghai under COVID lockdown until June 1, 2022, and many other major cities also experienced varying degrees of lockdown or restricted mobility during the quarter. All these unprecedented challenges significantly affected China's economic growth and exerted additional pressure on certain aspects of our operations. However, we were able to navigate all these challenges and achieve better than expected results. Thanks to the experience and insight we have accumulated during our 15 years of operations. Consistent investments throughout our chain of technologies enabled most of our employees to conduct their work from home during the lockdown, minimizing disruptions to our operations.
Our stable and capable senior management team with pragmatic goals coupled with an in-depth understanding of the industry seamlessly executed our decisive strategy despite micro obstacles. Together with the company's ongoing transition towards better quality borrowers in both domestic and international markets, coupled with our long-term goal of financial inclusion, these advantages further contributed to our growth momentum in this challenging quarter. Encouragingly, our total transaction volume steadily increased for the ninth consecutive quarter to reach RMB 41.5 billion, up 24% year-over-year and 4.5% on a sequential basis. Driven by our stable, better quality borrower base, we achieved a solid set of operational metrics despite weak macroeconomic conditions. The total number of unique borrowers in the quarter remained stable at around 3.1 million.
Additionally, our total outstanding loan balance further expanded to RMB 56.4 billion as of June 30, 2022, representing year-over-year growth of 44% and a sequential growth of 5%. With respect to our strategic transition towards better quality borrowers, our portion of Category A and B borrowers in the domestic market who meet our highest credit standards further expanded to 74% of our total borrowers in the second quarter, compared to 68% in the previous quarter, and from 54% in the prior year period. Accordingly, our average borrowing interest rate further declined to around 24.2% in the second quarter. Passion for technological innovation is embedded in our DNA, driving us to pursue high-quality innovation outcomes with the ultimate goal of serving the real economy and accelerating the digital transformation process.
We leverage a host of cutting-edge proprietary technologies to maintain our growth momentum while stabilizing our credit risk performance. For instance, our Feng Chao platform automatically monitors the credit assessment process and risk control rules, accurately tracks data fields, and swiftly evaluates the performance of these data sources, leading to a 120% increase in operational efficiency. Working hand in hand with Feng Chao platform, our Ming Mirror fraud detection system provides visual network and fraud detection images, which can uncover up to 65% of intermediary fraud during the loan application process.
Based on knowledge graphs, Ming Mirror utilizes complex network computing, machine learning, and a carefully selected rule engine, as well as over 2,000 models embedded with billions of relational data to effectively identify fraudulent activities. We have also implemented these technologies in our overseas markets, validating our technology's flexibility and the transferability, while strengthening our foothold in those countries. Supported by a prudent risk management framework with proven credit risk assessment and fraud detection technologies, we have maintained a stable risk level and overcome expected COVID-related issues while preparing growth. Our day one delinquency rate remained stable at 5.5% in the second quarter of 2022, with a continuous stable trend into July. Our delinquency rate below 90 days showed signs of recovery, falling to 1.44% from 1.56% in the previous quarter.
In addition, as the impact of the COVID-19 resurgence became more manageable, our second quarter vintage delinquency rate is expected to be around 2.4%. Finally, thanks to our loan collection team's impressive efforts, as well as the easing of lockdowns across China, we have also seen an improvement in our loan collection recovery rate to 91% from 90% in the previous quarter. While maintaining our solid growth momentum, we continue to diversify our funding sources and improve funding efficiency in the second quarter. More encouragingly, our overall funding costs have been on a gradual downward trend. In line with our expectations, we significantly lowered our funding cost by 31 basis points to around 7.5% during the quarter. Meanwhile, our capital-light proportion remained stable at 17% in the second quarter, compared to 13% a year ago.
These results are a powerful testament to our effective business strategy and skillful execution. We also remain committed to supporting small business owners during this challenging period. During the second quarter, we served over 500,000 small business owners across a variety of industries, such as wholesale, retail, and manufacturing, among others, representing an increase of 23% from the same period of 2021. Transaction volume for this segment further increased 68% year-over-year to a new record high of RMB 10.4 billion, contributing 25% of total transaction volume in the second quarter. Moving on to our international expansion. Our strategic transition toward better quality borrowers with enhanced technologies continue to deliver promising results. Transaction volume for the quarter increased to RMB 91 million, representing a sequential increase of 6%.
Notably, the proportion of better quality borrowers for the second quarter have executed continuous improvement to 62% from 54% in the previous quarter. With a larger number of better quality borrowers in our Indonesia business, our proportion of loans funded by local institutional partner also increased to 39% from 14% in the previous quarter, and from no institutional funding in the same period last year. More excitingly, outstanding loan balance for our international market increased to RMB 0.48 billion, representing a year-over-year increase of 60% and a 33% increase sequentially, validating the tremendous opportunities in the international markets. Last but not least, I'd like to provide an update on our ESG performance. At FinVolution, upholding our long-term commitments and responsibilities to our industry, the environment, and society is at the heart of our core values across operations.
We continue to make strides in improving our ESG management practices and advancing our ESG initiatives during the quarter. Our recently distributed fourth annual ESG report highlights our ESG policies and accomplishments in 2021, and our membership into the United Nations Global Compact reflects our ongoing endeavors. Furthermore, as part of our ongoing efforts in enhancing our data privacy and information security framework, we have obtained the ISO 27001 certification of Information Security Management System issued by DNV, a well-known international standard certification organization. We will continue to reinforce our ESG engagement on multiple levels while leveraging FinVolution's innovative technology and differentiators in ways that improve and sustain communities for generations to come.
In summary, our robust performance in the second quarter of 2022 is another powerful testament to our dynamic business model, technological know-how, and the dedicated efforts of our incredible team. Entering into the second half of 2022, we remain focused on refining our risk assessment and management framework, advancing our cutting-edge technologies, engaging better quality borrowers, and optimizing our product mix. Looking ahead, we remain confident in our resilience and our ability to skillfully navigate evolving market dynamics in a rapidly changing operational environment while capturing new opportunities in a more sustainable manner. With that, I will now turn the call over to our CFO, Jiayuan Xu, who will discuss our financial results for the quarter.
Thank you, Feng, and hello, everyone. Welcome to our second quarter 2022 earnings call. In the interest of time, I will not go through all of the financial line items on this call. Please refer to our earnings release for further details. As Feng mentioned, we are encouraged that despite multiple challenges in the second quarter, we still achieved the transaction volume growth for the ninth consecutive quarter while maintaining our risk metrics at a relatively stable level. With our transition towards better quality borrowers, coupled with strengthened relationships with funding partners and the consistent technological enhancement. The loan approval rates for our funding partners rose to around 80% in June, compared with 65% in the same period last year. We have cumulatively cooperated with around 70 licensed financial institutions, and we will continue to foster a strong and a robust pipeline of potential partners.
As the percentage of our better quality borrowers continue to increase, we expect our funding cost to reflect ongoing improvement during the next several quarters. Driven by our consistent efforts in research and development, we have continuously enhanced our chain of technologies throughout our operations, including customer acquisition, fraud detection, credit risk assessment, and customer service, among others. Consistent improvements in numerous operational metrics across multiple market cycles clearly illustrate the effectiveness of our tech refinements. Bolstered by this strength, our net revenues for the second quarter rose to RMB 2.7 billion, an increase of 12% year-over-year. Even more encouragingly, we also delivered a strong non-GAAP operating profit of RMB 682 million, and maintained a substantial balance sheet with RMB 11.4 billion in total shareholders equity as of June 13, 2022.
During the second quarter, our average borrowing cost was 24.2% compared with 26.2% in the same period last year. Of particular note, all loans originated for our new borrowers were under IRR 24%, reflecting our ongoing commitment to financial inclusion and our growing ability to align with regulatory directives. We maintained our take rate for the quarter at a stable pace of 3.8%. Together with our partner support and our constant efforts in optimizing funding costs, we are confident that we can continue to deliver solid results going forward. With the population of our capital-light model stabilizing at around 17%, our leverage ratio, which is defined as risk-bearing loan balance divided by shareholders' equity, remained stable at 4.1x.
Our unrestricted cash and short-term liquidity position further increased to RMB 5.2 billion from RMB 4.9 billion in the same period last year, representing an increase of 6% year-over-year, further demonstrating the robustness of our balance sheet. During the second quarter, we continued with our strategy of acquiring better quality borrowers, both in domestic and international markets, with attractive borrowing rates. With the population of better quality borrowers increasing both domestically and internationally, our operational metrics have shown improvement on multiple fronts. Going forward, we are confident in maintaining our growth momentum while keeping our risk performance at a stable level. Between January 2022 and July 2022, we deployed around $27 million to buy back our shares in the public market.
Since we initiated our share repurchase program in 2018, we have cumulatively deployed $158 million to buy back our shares on the public market, reflecting the company's commitment to returning value to shareholders on a long-term basis. Our board of directors have also approved an addition of $80 million to our existing shares repurchase program, expanding the program to $140 million. We believe that the increase in our share repurchase program is an efficient use of our existing capital, and it demonstrates our strong commitment to providing greater support for our shareholders amidst a challenging macro environment. Before I conclude my remarks, let me provide some additional color on our business outlook for the second half of 2022.
With uncertainties in the environment of COVID-19 situation, we remain cautiously optimistic that our business operations will continue to gain momentum both domestically and internationally due to our in-depth experience in the customer finance industry, our sophisticated technology expertise, and our strong relationships with our partners. We are prepared to capture both existing and new opportunities in the markets in which we operated. As a result, we now expect our total transaction volume in the third quarter to be in the range of RMB 44 billion-RMB 45 billion, representing an increase of between 16%-18% year-over-year. With that, I will conclude my prepared remarks. We will now open the call to the questions. Operator, please continue.
We will now begin a question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, we ask that you please kindly repeat your question in English. Once again, that was star then one to ask a question. At this time we will pause momentarily to assemble our roster. Our first question will come from Frank Chen of Credit Suisse. Please go ahead.
Thank you, management, for the opportunity. This is Frank Chen from Credit Suisse. Congratulations on a good set of results despite the headwinds. I have two questions. The first one is on loan volume. How does the company view volume growth in the second half? Based on the current guidance for the first three quarters, volume is expected to reach around RMB 125 billion-126 billion RMB. Is the progress to deliver the full year guidance of RMB 175 billion-RMB 180 billion RMB still on track? The second question is more specifically on international markets. How does the company view the contribution from international markets to volume and take rate? What is the company's outlook for international markets? Thank you very much.
好，谢谢 Frank。我现在回来一下第一个问题，就是关于我们全年的这个 loan volume 的 guidance。从结果上讲，我们现在还是会保持年初的这样的一个 guidance，就一千七百五十亿到一千八百亿。那我们的主要的一个考虑，是在于今年整个这个环境，其实还是充满了不确定性，上半年这个疫情的影响，那现在其实局部地区疫情还是有所反复，所以我觉得整个今年应该还是一个充满不确定性的这样的一个经营环境。所以在这样的一个大背景下，公司还是会保持一个相对比较审慎的这样的一个经营态度。当然我们自己各方面的这个能力，其实在这两年当中其实有了很大的一个提升，但我们还是希望比较审慎的这样的一个经营的思路。所以后面几个季度，从目前情况来看，如果没有什么特别大的一些意外的情况，我们还是继续会保持一个非常健康的高质量的一个增长。所以我们对于维持年初这样的一个经营目标，我们还是非常有信心。 OK, hi Frank, let me do the translation for Alexis . First of all, we still maintain our full year guidance of RMB 175 billion- RMB 180 billion. However, there are still full of uncertainties because the COVID outbreak is still happening in many different cities, and therefore we will still adopt a prudent approach. We have accumulated experience and technologies and refinements during this period, and therefore we are still able to maintain a healthy and progressive growth in spite of this very challenging macro environment. 然后这个第二问题，关于我们这个国际业务的。对，我们从去年下半年，就我们在这个非常积极地在做一个我们国际业务的战略上的升级，就是我们去做更好的这个人群。那到目前为止，我们可以说整个这个战略升级已经是基本上完成了。大家可以看到我们二季度的一个成交量，做到了是9.1亿人民币。那虽然环比的增长并不是特别多，大概是6%，但是请大家关注一下，就是我们在余额方面的这个环比增长是达到了33%。所以这个意味着什么呢？就是我们在整个这个客户结构，在我们的这个产品分布上，其实已经发生非常大的一个变化。那这里可以额外分享几个数据，一个呢就是我们二季度，这个优质的人群的占比已经达到了62%，这个比一季度54%又是有很显著的一个提升。然后，从产品分布上也可以看到，我们这个代表更加优质的，这个长期的这个分期贷款这个占比，也由上个季度的50%提升到了现在85%，那跟一年之前相比，一年之前大概这个比例只有20%。所以这是第二。那第三个，就是我们现在，特别是印尼的这个市场，我们的机构资金的占比也是有显著增加。我们现在机构资金的这个占比从上个季度的14%，在这个季度是增加了39%。所以这个几个方面，其实体现出来就是我们在海外，尤其是印尼市场的，整个这个战略，这个转型，以及人群的这个上浮已经取得了非常显著的一个结果。所以我们其实现在对于这个未来的发展是非常有信心。这个我们三季度，我们预计就整个国际的业务的这个成交量，我们这个可能会做到11亿人民币左右。那大概是就是在成交方面是环比有20%的增长。那从余额角度，大概有接近40%的增长。所以可以说我们整个国际业务在完成这个战略转型以后，我们现在是进入了一个，将会进入一个快速增长的这样的一个阶段。所以这是大概我们这个国际业务的一个情况。好，Frank，谢谢。看看有什么其他问题吗？
没有了，很清楚。Many thanks.
Thank you, Frank.
国林总好，感谢给我这个提问的机会，我是中信公司的李亚达。今天可能有两个问题想向国林总请教一下。第一个是关于我们定价下行的这个进程，想请教一下，就是截至到这个2022年的这个二季度，在总体和这个贷款余额新增口径，和这个新增贷款两种口径下，我们整体的一个平均定价都是多少？然后目前我们存量贷款中是否还有这个高利率的这个存量资产？整体呢，不知道可否分享一下这样的一个占比。然后往前看呢，就是怎么去看待定价调整这个结束的一个时间点。我们什么时候可以期待我们整体的这样的一个take rate会逐步去趋于稳定。 第二个问题可能想关于，还想请教一些风险指标，比如说关于九十天逾期率以及部分前瞻的这样的一个风险指标的一个变化趋势。我们是否可以认为就是说我们已经过了这个风险压力的顶点。整体呢，如果这个风险指标的转好趋势，我也想请问一下，背后的这样的一个原因，是我们做了一些获客运营以及风控端的这样的一个策略的改变，还是说伴随疫情逐步恢复，然后经济增长转好下，它可能会有一个这样的一个自然的一个反应。我翻译一下我的这个问题。 The first one is, by the end of Q2 2022, what are the average prices of our loan products in both our existing assets and the new originations respectively, and what is the proportion of high interest rate assets in the total outstanding balance of our loans?
Looking forward, when can we expect to see the endpoint of the pricing adjustments and to see a relatively stable take rate? This is the first one. The second one is what is the trend of our risk indicators such as 90-day delinquency and some leading indicators? Regarding the asset quality pressure, have we seen the peak already? As for the underlying reasons for improving the asset quality, is it because of our active change in the customer acquisition, operation and risk control? Or can we just view it as a natural response to the improvement of our macro economy and recovery from the COVID-19? Thanks, management.
好，谢谢亚达。我现在回答一下第一个关于定价的问题。因为我们这个产品的特点，所以我们从余额角度来看，跟我们从成交口径来看，其实结果是差不多的。这个期限，因为我们期限相对来都比较短，就八点多个月。所以我从成交口径，再给你一些这个feedback。其实如果有印象的话，应该记得就是我们在去年四季度，应该是非常早的就开始在做这样的一个定价方面的调整。那四季度的时候我们，已经在优质人群方面差不多已经有80%以上的客户，已经做到了24以下。那从今年上半年来讲，我们还是非常比较稳健地有节奏地在做这样的一个调整。那到了二季度，我们之前也分享过，我们现在的平均定价是24.2%，然后我们在新客方面，已经100%的全部都是定价在24以内。所以我们在这个24战略当中，我们其实也早就已经都准备好了。那对于未来的展望，我们会这么考虑，因为经历了整个上半年，特别是二季度的疫情的考验，我们评估下来，我们整体的业务模式还是非常健康，然后我们对自己的运营能力也是很有信心，所以使得我们能够觉得在业务方面其实有更大的空间，来充分执行我们客户上群的一个战略。所以我们计划是在Q3方面，在定价方面，还会更进一步地去做一些巩固。那我们Q3整个平均定价预计，会到大概是23.5%左右。然后这个定价调整，因为其实另外我们在资金成本上还有进一步优化的空间，在风险上也有进一步优化空间，所以我们觉得对take rate影响不大，大概这个三季度take rate可以在3.7%左右，所以这个是我们在定价方面的一个总体的安排。
Hey, Yada, let me do the translation for this question. From the outstanding loan balance and transaction volume perspective, we believe it is similar because our loan tenure is relatively short at about 8 months plus. Let me just remind you that in the fourth quarter last year, around 80% of our loans are already under IRR 24%. In the second quarter of 2022, our average loan pricing is around 24.2% in terms of transaction volume. Also all new loans, all loans originated for our new borrowers are already under 24%. We believe we are ready and have completed the pricing adjustment process. Our business model is healthy and we still expect growth to continue.
第二个问题是关于我们在2021年二季度。哦，OK，OK，sorry。
Sorry, let me just finish the translation. We believe there are still more room for us to continue with our transaction to better quality borrowers with further improvement in funding and also in our risk improvement. We estimate the average pricing in the third quarter will be around IRR 23.5, and we maintain a take rate of around 3.7%.
Let me quickly add one thing just to be more specific to the question about when do we expect the price adjustment to be done and when do we expect the take rate to be stable. In fact we believe the regulatory environment for pricing regulation. We don't expect major changes, you know, in the foreseeable future. Given, you know, our pricing is around 24%, we believe the price adjustment work is mostly done. Now, as we continue to move upscale in our customer quality, we do expect the price to very gradually drop, as the customers quality improve, because the better customers enjoy lower price, but it's gonna be very gradual. Coupled with the reduced funding and improve the risk efficiency. Overall, we believe our take rate going forward will be stabilized at the current level around like 3.7%, as Alex just mentioned. Yeah, thanks.
关于第二个，就风险，二季度的风险数据，我们先recap一下相关的一些数据。我们在二季度整体的预估大概是2.4，vintage口径，然后二季度我们default的这个指标是在5.5%。一到三十天的回款率，其实从Q1的90%上升到了91%。那从再细一点来看，我们觉得疫情的影响在这个月份当中还是有些波动的。我们差不多是在四月份的时候出现了一个高点，那四月份的时候我们看，现在看下来大概vintage是在2.4左右，然后后续在触发这个高点以后，风险就再回落了。那现在已经差不多回到了2.3以下。所以这里大家可以看到，我们在疫情阶段整个风险的波动还是非常小的。因为我们去年整体的风险预估就差不多在2.3左右，所以在疫情最严重的这个阶段，其实我们的vintage口径也就是往上上升了0.1，而且很快我们也就回落下来。所以在整个二季度，这个风险的整体应对还是非常有效的。那这里背后，我觉得首先就是疫情这个事情，应该相比2020年武汉，其实是严重了很多，因为对全国的波及，包括上海的长时间的封城，其实都有很大的冲击。然后这里我觉得特别也提醒大家，信也作为一家总部在上海的公司，其实我们坦率讲，在受到疫情的挑战，其实可能相比其他公司可能会更大一点，因为我们最主要的核心的员工，科技人员、运营人员，其实绝大部分都是集中在上海，所以我们都是经历了三个月的lockdown的这样的一个期间。
Okay, let me just do the translation for Jiayuan Xu. Let us just recap some of these metrics. Our Q2 vintage is expected to be around 2.4%, and our loan collection rate from 1 to 30 days further improved to 91% from 90%. Our delinquency rate peaked in April and May, and it has since returned to 2.3%. You can see that there are some fluctuations during the COVID period. However, the fluctuation for us is very small as it's only increased by 0.1%. We believe that for us, our company is based in Shanghai, and the impact for us is larger than a lot of companies, because the vast majority of our core management and employees are headquartered in Shanghai, and we have been locked down for three and a half months during the Shanghai lockdown period.
这背后的原因，我觉得也可以跟大家分享一下，我觉得两方面吧。一个呢，其实跟我们比较坚定地、充分地去执行我们客户上浮的战略，是非常有关系的。那两年前我们就已经非常明确去做客户上群的这样的一个战略。那去年四季度我们已经差不多完成了在24的这样的人群上浮的一个战略的一个结果。所以这个呢，对我们整体应对这样的一个疫情的一个影响，是非常有帮助的。那另外一个呢，其实我们在这个当中，我们的能力也是在不断地提升。因为整个信贷科技，它是个全链条的一个运营能力，那从获客到反欺诈，到风险，到贷后，到资金，它其实每个环节都涉及到大量自动化系统的这样的一个能力。那这里我觉得可以特别提两个地方吧，那一个呢就是我们在获客方面，我们这两年有个叫章鱼的这个平台，那这平台呢其实帮助我们在获客方面起了非常大的一个作用。在传统的这个获客平台，那如果每个人去管账户的话，可能只能管3个，但我们系统上可以做到一个人可以管30个账户。那另外一个呢，像做广告的效率，在我们平台上也会非常高，做100条广告，这种传统的话可能需要三个小时，那在我们这平台上只要五分钟，可以节约大概90%的时间。那另外在像反欺诈，我们一个叫明镜的这个系统，那我们在系统当中我们有超过1,000亿的关联数据和2,000多个模型，可以帮助我们在贷款申请过程当中，通过系统自动能够识别高到65%的这样的欺诈行为。所以这些系统方面的能力提升，结合自己公司的这个运营能力提升，能够帮助我们比较好地去应对这个外部的不确定性、疫情的这样的一些影响。
Give me a moment, please. I will do the translation for Jiayuan Xu. Okay, the reason for success is our determination in our transactions to better quality borrowers since two years ago. Also, our ability has been growing in our change of technologies from customer acquisition to fraud detection, to allocation of funding, etc. I would like to highlight two of our notable technologies. For customer acquisitions, we have the Octopus smart acquisition platform. Under the traditional account management, one person can only handle up to 3 accounts, but our Octopus platform enable one person to handle over 30+ accounts, and this increase our efficiency a lot. When setting up advertisement under the traditional method, it will need around 3 hours to set up 100 advertisements. However, with the Octopus platform, we only need about 5 minutes to set up 100 advertisement and we can save a lot of time. Another technologies that we are using is the fraud detection, is the Ming Mirror fraud detection system. This system is able to leverage a knowledge graph, utilize complex network computing, machine learning, and over 2,000 models embedded with billions of relational data. We are able to uncover up to 65% of intermediary fraud during the application process. All these technologies enable us to encounter external challenges and uncertainties during the COVID situation.
好，谢谢。看看还有什么其他问题吗？
我这边没有其他的问题了，非常清楚。非常感谢关于层分享，谢谢。
谢谢。
The next question comes from Alex Ye of UBS. Please go ahead.
陈一川，早上好。感谢给我这个提问机会。我这边就有几个比较简短的 follow up。第一个是关于这个 funding cost 这一端，能不能给我们展望一下下半年到年底这个还有多少下降的空间。然后第二个关于资产质量这一块，能不能分享一下，比如最近七月到八月这段时间我们 default 的这个趋势是怎么样的，然后因为我们的这个小微人群也是占比比较高，我们看到小微人群的资产质量有没有跟我们整体大盘有一个显著的不一样，或者更加承压的一个情况。然后第三就是，现在宏观市场表现的这个消费数据好像比较疲弱，就我们看到的这个贷款申请量的一个角度来看，能不能分享一下跟去年同期的一个量的情况是怎么样，是不是比普通时候要更疲弱一些整体，然后最近的一个恢复情况。
To translate my question. First one is on the funding cost outlook. Could you share with us how much more room do we expect for it to improve for the rest of this year? Second question is on your asset quality. Could you also give us an update on the latest trend on your day one delinquency in say July and August? Also, is there any material differences between your SME customers versus your overall portfolio? Thirdly, on the consumer credit demand, the macro data has been weak and so from your perspective, have you seen the application volume declining materially from same period last year? How has been the latest recovery trend? Thank you.
好，谢谢 Alex。第一个关于资金成本，那二季度呢，我们其实相比一季度，其实已经有一个非常明显的优化，下降了大概三十个 BP。那其实我觉得二季度其实也是非常不容易，因为疫情阶段，其实机构的合作伙伴也非常关注这个风险的变动，所以会变得更加谨慎。但这个过程当中其实，以我们的数据，其实是很好地证明我们在应对上面是比较放心的。那对于下半年呢，我们觉得就资金层面，还会进一步的空间。我们现在初步预估呢，在下半年大概资金还能再下降二十到三十个 BP，达到这个七点二到七点三这样的一个水平。所以这个是跟资金成本相关的。第二个呢——哦，OK。
Alex Ye, let me do the translation for the first question. In the second quarter versus the first quarter, our funding cost improved by 31 basis points on a sequential basis. During the COVID period, our partners will be very concerned about the risk matrix fluctuation, but we give them confidence with our stable risk performance. In the third quarter, we expect further improvement in our funding cost of between 20-30 basis points.
第二个，关于这个day one的逾期率，我们要去到差不多是5.5%。那现在，从这个数据来看，我们这个也是在有进一步的优化，这个趋势是在变得更好。然后提到小微，我们小微第二季度做了五十万个用户，然后成交量也是首次超过了一百亿。那从疫情阶段，我们看到小微企业，其实确实会受的影响会更大一点。但这个对我们的影响并不大，主要原因是因为在疫情前，其实我们的小微的风险水平，就是比大盘的会好大概10%左右。所以在疫情阶段，它上升得会多一些，但其实跟我们的平均水平也差不多。那现在，我们也看到小微的风险水平，也已经回落了，比平均水平其实会更低一点。所以一季，我们觉得这个小微，在疫情以后，它的风险会回到之前，就是比平均水平略微低这样的一个水平。
Let me do the translation for question number two as well. Our day one delinquency rate is around 5.5% in the second quarter, and we have seen improvement since then. In the second quarter, we serve over 500,000 small business owners with over RMB 10 billion in transaction volume. Before the pandemic, the credit performance of our small business owners is around 10% better than our retail borrowers. During the lockdown period, we have seen the risk metrics of small business owners is slightly higher than the retail borrowers. In the second quarter, we have also observed that the risk level for small business owners have returned to similar levels with the retail borrowers. Going forward, we expect the risk metrics for small business owners to fall below retail borrowers.
最后一个关于整体的客户需求，从我们角度来看，它的影响还是比较复杂，比较多方面的，有不利的，也有有利的。比如说像这个疫情的封城，它会对于消费有一些物理上的限制，那会影响。宏观环境的不确定性，对消费的信心也会有影响。此外呢，也有一些对消费利好的一些因素，比如说国家宏观政策方面的一些刺激，尤其是流动性方面的一些供给。另外呢，就是在疫情后，也出现了一些报复性的消费。其实这些因素叠加以后，我们觉得综合的影响呢，总体还好。另外一方面，从我们这个数据上呢，也能基本上来佐证。我们从二季度，包括现在的贷款申请量的数据来看，基本上跟一季度，包括去年四季度差不多，就是上下可能会有个1%~2%这样的一个波动，但总体还是基本上是一致的
Alex, let me do the translation for the last question as well. Regarding the customer demand, the data from the overall consumer data is rather complicated. It will be affected by various factors. Example, the macro environment impact affecting consumer confidence, the stimulus policy impact on liquidity, and the post-pandemic recovery impact on consumption. If you take into consideration of all these factors, the overall consumer consumption has been rather stable with limited fluctuation within 1%-2%. Our data can also prove that the loan application demand has been relatively stable in the second and third quarter.
好，Alex，看看你还有其他问题吗？
好，非常清楚。谢谢。Thank you.
好，谢谢。
The next question comes from Thomas Chong of Jefferies. Please go ahead.
早上好，谢谢管理层接受我的提问。我的问题主要是，第一个是关于competition，由于我们的pricing现在都已经是大概twenty-four percent，往后的话我们怎么看，我们跟其他同行或者是传统银行，未来的一个competition。第二的话就是，也是关于我们international的business，想问一下我们从国内的经验，有哪一方面可以replicate去海外那边，然后我们怎么看，海外跟domestic两个方面的consumer behavior，有什么最大的不一样的一个difference。Thanks management for taking my questions. My first question is about our competition.
Given the pricing is trending to 24% and going forward, how should we think about our competition with our peers and traditional banks? My second question is about the international business. How should we think about the areas that we can replicate from domestic to international? Are we seeing any differences in the behavior between the borders in these two areas? Thank you.
谢谢 Thomas。我先来回答一下第一个问题，关于竞争的这个问题。我觉得竞争这个事情，其实从几个层面来看，那第一个呢，就从这个大的市场，那我们觉得整个中国市场呢，非常大，而且，尽管是这个有不确定性，但其实还是一个非常稳健的在这样的一个增长。那第二个呢，我觉得从这个玩家角度来看，那虽然说我们这个定价是往下去调了，但我觉得这里其实跟传统金融机构，大家还是在不同的这个 sector 当中。而且，其实也可以看到，就是中国传统金融机构，其实有几千家，那他们的定价其实也是都非常低的，所以说明这个市场其实呢，容纳的这个玩家是非常多的。那现在是在如果我们细分一点，从18到24这个赛道来看的话，其实玩家并没有那么多。那第三个呢，我觉得从参与者的角度来看呢，其实现在的这个玩家相比以前应该是明显少了很多。而且从国家对于这个做金融的这个态度，应该不像传统的这个互联网的这个思路，会出现赢者通吃的这样的一个状态，更多的是大家在当中是一个各自稳健的一个增长。所以结合这几方面呢，我觉得从我们自己的这个感受，从我们这个数据层面来讲呢，就是我们觉得竞争这一块呢，还好，我们对未来在中国市场上的这个继续的这样的一个增长是非常有信心的。
Thomas, let me do the translation for you. Okay, we can view competition from a few different perspectives. Number one, China market is large and still growing. Number two, compared with the traditional financial institutions, we are still not in the same segment as them as their pricing is much lower. If you think about this, right, there are several thousand traditional financial institutions. Number three, the players in this market has been reducing a lot. In finance market, it is very different from the Internet segment because it is not a winner take all situation. We feel that competition is still relatively okay and we are still very confident of the future growth.
Hey, Thomas Chong, this is Feng Zhang. Let me take the second question. Yeah. With regard to our expansion internationally, I think there are a lot of things we can and we are leveraging, you know, from our domestic experience.
I think the most important thing is, you know, please remember that, we have 15 years operational experience in the China market. So if I, if we think about, you know, the international market and we are mostly in the developing countries and particularly in Southeast Asian region. You know, in terms of , fintech, you know, developing stage, probably somewhere around five to 15 years ago, if you compare to China, around that period. I think there are many aspects, but, I would say like, you know, Indonesia is probably around kind of like similar to 2014, 2015, period, of the domestic China.
Um, I think, you know, the credit infrastructure is still undergoing pretty rapid improvement, and the market is growing very fast. And I think, you know, if we for another country, we are operating in Philippines, it is probably like in a few years, you know, behind Indonesia. So I think, you know, the experience we have accumulated these years are very valid and valuable, you know, for our, expansion, for our development, in Southeast Asia market and , you know, additional , the future, other developing countries. I think, you know, it is on systems, you know, on , know-hows and, on talents, right?
You know, we have a very experienced team. You know, for example, one of the things that I think are particularly relevant, you know, if we are thinking about building a valuable and sustainable business in Southeast Asian region, is our experience in transitioning or transforming our business from a high pricing you know, population strategy to a very healthy low pricing you know, high quality customer-based strategy. You know, currently, with infrastructure situation, credit infrastructure situation in South Asian market, inclusive finance, the pricing is, you know, it is higher than, you know, what the best of China market has, which is normal. I think matches the developing stage of those markets.
As we move forward, we're gonna see price drop, you know, both from regulatory requirement perspective and from the economic development and the market competition perspective. You know, that journey we've went through in China and our team has tons of experience in that. That kind of like explain why we had managed the transition in our Indonesia market, you know, for the last one year period when we moved upscale, you know, in a pretty good speed that Alex has just mentioned.
I think, you know, those experience are very valid, and that makes us feel very confident, you know, coupled with, if we think about, hey, you know, in China, like, you know, 2014 and 2015, you know, we're very optimistic about the growth prospect, you know, in those markets. We think our experience is gonna help us, you know, become a leading player in those markets. Thanks.
Thank you.
This concludes our question and answer session. I'd like to turn the call back over to the company for closing remarks.
Hello, everyone. Thank you for joining FinVolution Group second quarter earnings conference call. If you have any further questions, feel free to reach out to our investor relations team. Have a nice day.
The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.