Hello and welcome to the Deutsche Bank Virtual Investor Conference, DVVIC. This is Zafar Aziz from the Deutsche Bank team. I'm pleased to welcome our next presentation by Yiren Digital from China. Before I introduce our speaker, a few points to note. Please click on the questions box to ask a question. All of today's presentations will be recorded and can be accessed via the Deutsche Bank website, www.adr.dv.com. I'm happy now to hand over to Yiren Digital.
Hello everyone. Thank you for joining Yiren Digital's second virtual roadshow this year by Deutsche Bank. My name is William Hui and I'm the CFO of the company. We are the leading digital consumer lending and fintech platform operating in three major markets in Asia. We are building the next generation fintech platform based on AI and Web3 technology. Let me briefly walk through our history. So we began our digital lending business in 2006, and we are listed on the New York Stock Exchange in 2015. And in 2019, we expanded into insurance brokerage business through strategic restructuring and acquisitions. In 2024, we facilitated 53.9 billion RMB of loans, or RMB 7 billion. To six million individual borrowers. Since 2021, we have been investing heavily in AI R&D. We have our own GPU computing resource for model trainings. We built our own LLM and successfully integrated into our platform.
From the process from the borrower acquisition, risk management, and customer service. The technology innovation and industry know-how has prepared us to build our next generation fintech. So here are some of the investment highlights. We have strong cash flow from our lending and insurance business. They generated about RMB 200 million of cash flow in 2024. The strong cash flow allows us to fund ongoing AI developments and Web3 initiatives, which I will go through later in this session. While maintaining financial strength. We are expanding overseas to further diversify our business. We entered into the Philippines in 2023 and Indonesia just two months ago. We expect the overseas business will contribute 10% of our business in 2026. On the technology side, this year we introduced our legal and compliance LLM, Zhu, and multi-AI agent platform, MultiQ, which we will discuss later.
Looking ahead, we will launch a Web3 platform to support our crypto assets and RWA-related services. And finally, our share price does not reflect the potential of the technology mentioned above. Our market cap is roughly equal to our cash holding. So we will continue our dividend policy while investing in growth and maintaining a healthy cash flow. In the second quarter of 2025, our financial services, or the consumer lending, accounted for 90% of our revenues. In the second quarter, the financial services generated about RMB 1.5 billion , or RMB 214 million, of revenue, representing a 75% increase year-on-year. The growth is partially offset by the insurance brokerage business, which was facing an overall industry margin pressure. But in Q1, we started our online insurance business. The gross premium in the second quarter grew by 106% quarter on quarter. So that momentum is expected to continue in our second half.
Our online insurance business leverages, existing lending traffic and applies AI-driven precision marketing. The online insurance segment generates at least 40% gross margins. Our AI capabilities are deeply embedded across our lending value chain. Our model analyzed 800 million data records accumulated over 19 years. To classify borrowers into 10 risk tiers. The system now reviews all users' submitted documents and detects about 30,000 suspicious entries a day. So that prevented about RMB 180 million of potential fraud losses last year. On the marketing side, we work with 50 external traffic channels, such as TikTok, Baidu, Tencent, and Facebook, for our overseas business. Our generative AI produces 1,700 personalized communications per day. So this improved the personalization, increased the repeat borrowing rate from 65% in the fourth quarter of 2024 to 77% in the second quarter of 2025.
On the loan recovery side, 81% of our first-day delinquent loan is being handled directly by our AI-enabled recovery agents. So these are the two AI innovations we have launched this year. So as mentioned earlier, our large language model, Zhu. It is a multilingual, sentiment-aware enterprise LLM, supporting meeting analysis and communication planning, and also the legal contract review. And it also automates the tax filing. The model has received regulatory approval for commercial use, meaning we can deploy the model to external corporate customers. Another innovation is the MultiQ Agent platform. This multi-model, self-managed agentic AI platform integrates six specialized AI agents to handle critical and complex financial functions. It can generate text, voice, and images. It supports customer service, compliance. Sales, risk management. And other business scenarios. One notable example is that the AI capital deployment agent is able to predict and deploy capital movement.
The 10-minute agentic AI process achieves 100% capital deployment accuracies. And generates a very thorough report, which would take six humans one week to do. One of the significant features of the MultiQ is its self-maintenance features and the ability to manage multiple agents to handle complex tasks. We have monitoring agents that monitor the agent performance 24 hours a day. If the performance of those agents begins to deteriorate, they will notify our R&D team for an upgrade. The internationalization is one of our key strategies for our next generation fintech. We expanded to the Philippines in 2023 and achieved profitability after 14 months. Our Indonesian business just started the operation in September. And we expect to ramp up the volume in the first half of 2026. And we continue to explore other geographies for expansion. The experiences in the Philippines and Indonesia show our technology platform.
And operation model is highly replicable for big markets like Indonesia, which took us six months to build from zero to live. Also in niche markets like the Philippines, where we can turn profitable within a short period of time. So here's our financial highlights. In the second quarter of 2025. Our total revenue was RMB 1.65 billion , or RMB 236 million, representing 13% growth year-on-year. The growth is driven by 75% growth in the online lending business, partially offset by a 50% decrease in the insurance brokerage business. The overall revenue from the insurance brokerage business segment shows a 3% increase quarter by quarter in Q2, held by the triple-digit growth from the online insurance business. On the net income side, we have reversed five quarters of a net income decline and achieved a net income growth quarter to quarter in the second quarter of 2025.
So driven by the AI automation that gives us that cost saving and increased revenue. For Q3, our business may be impacted by the new lending regulation and increased credit risk of the entire market. But the appreciation of the Ethereum, which we purchased in the first quarter, and the growth from the internet insurance will help support the growth for the second half. So now we will discuss our future business. So in the future, we believe RWA tokenization and AI-enhanced financial operation will drive the next generation of fintech. And also the next generation of fintech will expand our business internationally and use the RWA to provide monetization and price discovery for many different asset classes. The RWA market is projected to reach 30 trillion by 2028. So our model spans the full value chain. So our business model encompasses the entire value chain.
We begin with the coin custody services, providing custody for institutional clients and generating income through staking. We also offer exchanged and collateralized lending integrated with our existing lending businesses. Once we have a good coin deposit base, we will launch asset management and hedge insurance to provide more diversified and value-added crypto-based investment products. If the traditional financial institutions are led by Goldman Sachs and Morgan Stanley and UBS and Deutsche Bank, so we hope to be one of the leading companies in the Web3 finance in the future. So our first step is to build a blockchain technology platform. We established a technical development team in Hong Kong in April. And using the AI technologies, we will initially develop an Ethereum staking business and the infrastructure with a high cash flow efficiency and low regulatory risk.
We will begin a small-scale functional release in early November with the Platform 1.0 to be launched in the first half of next year. So our target customers are the institutional clients who are holding cryptocurrency assets, such as the funds and the listed company and the DAT company. So this is our strategy for the RWA. There are three major components of RWAs: assets, capital, and platform. So regarding the assets, we have about RMB 7.5 billion in assets that can be tokenized, including the U.S. Treasuries, consumer finance loans, and the AI algorithms, and the computing power. So regarding the capital, we have access to numerous asset management channels overseas through our parent company, CreditEase Network. The platform connects assets, capital, enabling tokenization, and Web2 and Web3 asset trading and decentralized finance. So this is the ecosystem we plan to build.
It will include not only our assets, products, and channels, but also third-party assets, third-party capital, and third-party developers. In early October, we signed a memorandum of understanding with a Singapore-based ChainUp to jointly develop a Web3 platform. The ChainUp provides a trading platform, which we provide the underlying assets. So we will collaborate to develop new products and technologies for market launch. So here are our latest updates for our cryptocurrency business timetable. So as you see, we make our initial purchase of Ethereum in the first quarter. And in June of 2025, we established a digital asset task force in Hong Kong. And in 2025 we are establishing a partnership with different parties and also started building a beta system, which will be launched later in November. And in the 2026 first half, we will launch our 1.0 platform for staking service.
And in the second half of this year, we will start rolling out our first fixed-income product for the Web3 platform. So for our valuation, as you see, Yiren Digital's share price has increased by 16% year-to-date. So it's outperforming other loan facilitation companies in China. So our dividend payout ratio is nearly 8%. It's already the second highest in the segments. So we have increased our dividends in September by 10% year-on-year, and we will continue to our dividend policies to reward our shareholders. So our PE ratio has not yet reflected the recent trends in the Web3, and this is primarily due to the volatilities of the crypto market in October, coupled with the implementation of the new regulations for loan facilitation in China. So the investors have yet to adapt to these changing environments, but we believe that there are few Web3-listed companies.
There are very few Web3-listed companies that have cash flow in the market. So furthermore, driven by the internationalization and technical advancement of our business, there is a significant room for valuation growth. So this concludes my presentation part of our roadshow, so I'm open for questions. Let me go through that. Okay, so the first question. In simple terms, how will you generate free cash flow from cryptocurrency in the future? I would say, initially, when we built our staking business. It's relatively. The development cost is relatively low, and we have targeted a few potential clients, like some of the DAT companies, which they have purchased a lot of Ethereum on their balance sheet, and they are looking to generate yield. So I think the ROI for the initial staking business is very high.
So going forward, we are using those cash flows to invest in our next initiative, which is the crypto investment products and the other services that I've just mentioned. Okay, next questions. Can you elaborate on your approach to RWA tokenization and the opportunity size here? So far, what we have done in our research is. In terms of the underlying assets for the RWA, we see there is a private credit asset class has the highest growth so far. This is the Coinbase statistics. So for the loans. If you go back to our core business, which is the personal loan. Which is considered a private credit as well. So we are building up the assets which we already have. We lent about RMB 7 billion of loans last year.
And now we are building up the other end of the equation, which is the capital, which we are working with a few asset management companies to do that. So I think the key critical part, especially in Asia, is we are waiting for the issuance of the first stablecoins. In Hong Kong, the legislation is in effect since August of this year. So I think the government expects to approve the first batch of a stablecoin in the first half of next year. So after that, we will see a big jump in terms of the adoptions of the stablecoin and the RWA. Okay, next questions. How do you see the evolving regulatory environments in China affecting your consumer lending and the insurance brokerage business? Okay, let me speak for the consumer lending first.
From the consumer lending in China, I would say there is quite a lot of regulatory headwinds since April this year. As the government announced, they will enforce the rate cap on the consumer lending. So that is in effect from October this year. And so far, last weekend, I think the government made the announcement that they will rather relax on that regulation a little bit just to give the industry to better adopt the new environment. So that we see is positive. But at the same time, we are preparing ourselves for this new regulation when the government decides to tighten the regulation again. And on the insurance brokerage side, I think we have two parts of the business. One is the traditional insurance brokerage, which is quite affected by the commission rate cap.
But on the other side hand, our internet insurance business has been growing very quickly. So it's been growing in a triple-digit quarter by quarter. And in the second quarter, it accounts for about 20% of our insurance segment's revenues. And we see that to grow to more significant portions in Q3 and Q4. So far from our insurance segments, it has definitely turned around. As we see in our second quarter, our revenue, we see a revenue growth compared to the first quarter. So I think our insurance business has turned around. And for the lending business, besides the regulatory headwinds, and we are also monitoring the risk quite closely as well. Okay, let me go through the next questions. How does blockchain integration fit into Yiren's long-term strategy? Should it serve only as a treasury strategy? We think our blockchain strategy is very strategic to us.
So as we see the fintech is moving toward the Web3 era, so to speak. And we cannot miss out these opportunities. And we believe our business is ready for. The blockchain integrations because, first of all, we have a very strong AI that will help us to speed up the technology developments. And also our traditional know-how on lending because so far, when we talk to a lot of industry players, particularly on the Web3 space or those Web3 native companies, they all have very sophisticated trading platforms and the infrastructure. But a lot of times when they try to integrate their business to the traditional Web2 environments, I think they need some help. For example, when I was talking to one of the crypto exchanges in Hong Kong, and they want to do a Bitcoin collateralized lending.
So that involves risk management on the credits, which they have very little experience of. So they are looking for us to work together and provide those risk management know-how. So I think those are the angles that we see the opportunities. Okay, next questions. Do you expect to continue generating positive net income margins, or could the increasing regulation potentially lead to a further decline? The way we see it is we will continue to generate positive income margins. No question about that. If you look at 2024, our net income is RMB 200 million, and it is still growing. Yes, the regulation will give us some pressures on the margins. But we believe there are different parts of our business that are growing very well. For example, the internet insurance business that I just mentioned, and also our crypto business will start contributing revenues next year.
So these are, I would say, the positive side, and that sort of will offset some of the downsides from the regulatory headwinds. But at the same time, we see the overall credit risk cycle have bottomed in the fourth quarter of this year. As we monitor the numbers in October and September, we are seeing it's trending. The risk is trending down. So that will be positive for us. So, okay, I think we are running out of time. Thank you very much. And you can keep us. We have the X account and the LinkedIn, so you can see our news updates from those websites. So thank you.