Below the 24% red line, Lexin's life-and-death dilemma and the ultimate fate of the assist-lending industry

Once the industry’s 24% annualized comprehensive cost red line is fully implemented, the gates to its wild growth will be completely closed. Lexin, which once relied on high-interest lending to support most of its revenue and became a leading listed company in the U.S. lending sector, is now caught in an inescapable survival crisis.

On October 1, 2025, Lexin fully stopped offering loan products with an annualized interest rate exceeding 24%, publicly declaring a “proactive compliance and a decisive break” approach. However, this seemingly resolute turnaround is actually a passive compromise under regulatory pressure, not a move to create new opportunities. Instead, it exposes the collapse of its long-held profit myth, revealing a series of crises: core business collapse, sluggish transformation, and eroded capital confidence. The end of the high-interest lending model marks the conclusion of Lexin’s traditional business story and reflects the real pain of the entire lending industry’s transition.

Lexin’s compliance shift has never been a strategic upgrade driven by initiative but rather a helpless response forced by regulators. Behind this lies a business structure that has long been a hidden danger: 76.5% of its revenue comes from guarantee and lending facilitation, while technology services account for only 13.3%, and installment e-commerce services less than 10%. For years, Lexin’s profit model depended on a covert combination of “low nominal interest rates + high service fees + high guarantee fees,” quietly pushing the actual annualized rate above 30%. This high-yield, high-risk customer coverage relied on regulatory arbitrage and reckless expansion. The rigid enforcement of the 24% annualized cap directly cuts off this profit stream, squeezing profit margins per loan by 30%-50%. For Lexin, which derives over 70% of its revenue from credit, this move is akin to draining the lifeblood, instantly undermining its profitability foundation.

Even if Lexin touts signals of “customer upgrading and asset optimization,” it cannot hide the underlying issues of shrinking scale and rising risks. In the first three quarters of 2025, Lexin’s loan volume fell by 2.9% year-over-year. While seemingly impressive data shows overdue rates over 90 days dropping from 3.7% to 3.1% and customer acquisition costs decreasing by over 10%, these are merely stopgap measures resulting from abandoning growth and shrinking high-risk customer segments. In reality, Lexin’s main customer base has long been young people in second- and third-tier cities, whose income stability is insufficient and who are not high-quality borrowers. Overdue rates have hovered around 3%. When the previous high-interest model used to hedge bad debts became ineffective, Lexin found itself in a dilemma: continuing to lend would cause bad debt risks to rebound sharply without high yields; tightening credit would lead to massive loss of core users and further shrink its business. Its externally promoted AI risk control upgrades have yet to resolve longstanding issues like poor user experience and high complaint rates. These are merely superficial branding efforts that fail to address the fundamental conflict between risk and scale.

As the first U.S.-listed lending platform to promise an annualized interest rate not exceeding 24%, Lexin’s “compliance show” has not led to sustainable growth but instead plunged it into a profitability dead end. After the exit of high-interest lending, Lexin’s business logic has been fundamentally reshaped, rendering its previous profit model completely invalid. Strict regulatory requirements for transparency and the ban on excessive lending prevent Lexin from increasing revenue through hidden fees or maintaining growth via reckless customer acquisition. Compounding this are legacy issues like illegal campus loans and out-of-control debt collection outsourcing, further eroding market confidence and causing its valuation to remain depressed. Today, Lexin stands on thin ice—any further tightening of regulatory policies could lead to fines or even a complete halt of operations.

More critically, Lexin’s core competitive moat—installment e-commerce—has long hit growth ceilings and can no longer support the company’s transformation. Its “Fenqile” mall, which once achieved a 139% year-over-year GMV increase during the 618 shopping festival in 2025 through 3/6/12-month interest-free installment plans, benefits from clear fund use, user-friendly experience, and a closed-loop of consumption and repayment data—advantages that pure cash loan platforms cannot match.

But beneath the surface, the fatal flaws of installment e-commerce are glaring:

1. Its product category is extremely narrow, heavily reliant on 3C (computer, communication, consumer electronics) products, with over 60% of transactions tied to smartphones and digital devices, making it vulnerable to industry fluctuations.

2. Its supply chain competitiveness is weak; it lacks price advantages and product diversity compared to giants like JD.com and Tmall, making it hard to build a core competitive edge.

3. Its profitability model is unsustainable; during periods of weak consumer markets, it can only maintain operations by cutting subsidies, which deteriorates user experience and accelerates traffic shift to leading platforms.

Even with short-term transaction growth, Fenqile cannot form an independent profit cycle and remains dependent on lending facilitation. What was once a protective moat has now become a barrier trapping Lexin—unable to support high growth or replace lending as its main revenue source, turning into a true “growth bottleneck.”

As the old growth engine stalls and new avenues remain distant, Lexin’s transformation path is fraught with difficulties. The company has attempted to pivot toward becoming a provider of underlying consumer finance services—launching open risk control capabilities, replicating scene-based installment, and exploring brand collaborations. While these paths seem clear, each is difficult to sustain.

Lexin’s self-developed risk control system, despite extensive transaction validation, faces low demand from banks, consumer finance companies, and local micro-lenders for outsourced risk tech under strict regulatory requirements. Overseas expansion remains in a burn-money stage, contributing less than 5% of revenue and unlikely to generate short-term profits. Transitioning to a lightweight capital model requires abandoning high-margin guarantee services and accepting low-margin SaaS and tech services. Lexin lacks core technological barriers and sufficient customer base in this area, making success highly unlikely.

From a business perspective, Lexin’s predicament is a combination of a collapsing model and strategic confusion. The new lending regulations have ended the era of high leverage and high returns, but Lexin failed to prepare alternative growth strategies early on. It remained fixated on short-term gains from high-interest lending until core operations were tightly regulated, leaving it scrambling for a transformation.

Tech services, scene-based installment, overseas expansion—these are well-trodden “unprofitable” tracks industry-wide. Lexin lacks first-mover advantages and sufficient resources; its so-called transformation efforts are reckless attempts in desperation. Abandoning high-margin lending to shift into low-margin tech services demands immense strategic courage and long-term investment, which Lexin has yet to demonstrate. Its transformation journey is destined to be arduous.

With tightening regulation, plunging profits, exhausted old businesses, and stalled new ventures, Lexin now stands at a crossroads of life and death. Its so-called “compliance turnaround” is merely passive survival after high-interest lending’s demise; its “strategic upgrade” is just a gloss to hide growth weakness. When the 24% annualized cap becomes an unbreakable industry rule, when installment e-commerce loses growth momentum, and when the transformation path is riddled with obstacles, Lexin’s future appears increasingly bleak.

In truth, Lexin’s crisis is not just a company’s problem but a microcosm of the entire industry’s end of the wild growth era. The regulatory-driven reshuffle is accelerating the淘汰 of players lacking core competitiveness, overly reliant on regulatory arbitrage, and with unbalanced business structures. In the past, the industry relied on information asymmetry and regulatory loopholes, expanding rapidly through high interest and leverage. But this reckless growth model is unsustainable. As regulatory frameworks improve, compliance becomes the industry’s bottom line, and core competitiveness becomes the key to survival.

Without the shield of high interest rates, scale expansion, or a reliable second growth curve, Lexin’s business story has reached its end. Under the dual pressures of compliance and profitability, this once-leading platform in the lending sector is gradually slipping into obscurity. The lessons of Lexin serve as a warning to the entire industry: only by abandoning reliance on regulatory arbitrage, cultivating core capabilities, diversifying growth strategies, and balancing compliance with profitability can companies stand firm amid industry transformation. Otherwise, they will inevitably be eliminated by the times.