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 era of wild growth in the industry will be completely halted. Lexin, which once relied on high-interest lending to support over half of its revenue and became a leading player listed on the U.S. stock market, is now caught in an inescapable survival crisis. Starting October 1, 2025, Lexin will cease offering loans with an annualized interest rate exceeding 24%, publicly declaring a “proactive compliance and a decisive break” — but this seemingly resolute turnaround is actually a passive compromise under regulatory pressure. It has not opened new avenues for growth; instead, it has shattered the long-held profit myth, exposing its multiple difficulties: collapsing core business, sluggish transformation, and eroded capital confidence. The death of the high-interest lending model marks the end of Lexin’s traditional business story and vividly reflects the painful transition faced by the entire lending industry.

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 embedded fatal vulnerabilities due to the dominance of the “lending aid” sector. The Q3 2025 financial report clearly depicts an unbalanced business model: guarantee and lending facilitation income account for as much as 76.5%, while technology services make up only 13.3%, and installment e-commerce services less than 10%. For a long time, Lexin’s profitability relied on a hidden combination of “low nominal interest rates + high service fees + high guarantee fees,” quietly pushing the actual annualized rate above 30%. This high-yield model covered bad debt costs for high-risk customers, fundamentally relying on regulatory arbitrage and coarse management. The rigid enforcement of the 24% annualized interest rate directly cuts off this profit lifeline, 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 its own foundation, instantly shaking its profitability.

Even if Lexin emphasizes positive signals like “customer upgrade and asset optimization,” it cannot hide the reality of declining business scale and mounting risk. 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 scale growth and shrinking high-risk customer segments. In fact, Lexin’s main customer base has long been concentrated among young people in second- and third-tier cities, a group with unstable income and not high-quality borrowers. Their overdue rate has hovered around 3% for years. 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 returns; 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 marketing efforts to mask transformation intentions, unable to truly resolve the contradiction between risk and scale.

As the first U.S.-listed lending platform promising a total product annualized interest rate not exceeding 24%, Lexin’s “compliance show” has not led to sustainable development but instead plunged it into a profitability dead end. With the exit of high-interest lending, Lexin’s business logic has been fundamentally reconstructed, rendering its original profit model completely invalid. Strict regulatory requirements for transparency of interest rates and bans on excessive lending prevent Lexin from increasing revenue through hidden charges or maintaining growth via coarse customer acquisition. Compounding the problem 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: further tightening of regulatory policies could lead to fines or even business suspension at any moment.

More critically, Lexin’s core moat—installment e-commerce—has long reached its growth ceiling 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 the ability to form a closed loop of consumption and repayment—advantages that pure cash loan platforms cannot match.

However, beneath this prosperity, the fatal flaws of installment e-commerce are glaringly evident:

First, its product category is extremely narrow, heavily reliant on 3C products, with over 60% of transactions tied to mobile phones and digital devices, making it vulnerable to industry fluctuations and changes in device upgrade cycles.

Second, its supply chain competitiveness is weak. Facing giants like JD and Tmall, it lacks price advantages and product diversity, making it difficult to develop core competitiveness.

Third, its profitability model is unsustainable. During periods of weak consumer markets, it can only maintain operations by reducing subsidies, which directly degrades user experience and accelerates traffic flow to leading platforms.

Even with short-term transaction growth, Fenqile cannot form an independent profit cycle and remains dependent on lending aid. This once-formidable moat has now become a trap, unable to support high growth or replace lending aid as the main revenue source—becoming a true “growth bottleneck.”

As the old growth engine stalls and new growth avenues remain distant, Lexin’s transformation journey 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 installments, 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 technology under stricter regulatory requirements. Its overseas expansion remains in the burn phase, contributing less than 5% of revenue and unlikely to generate short-term profits. Transitioning to a lightweight capital model would require abandoning high-margin guarantee businesses and accepting low-margin SaaS and tech services. However, 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 implementation of new lending regulations ended the era of high-leverage, high-yield reckless growth. Yet Lexin failed to prepare alternative growth strategies early on, remaining fixated on short-term high-interest lending until core operations were tightly regulated, forcing it to hurriedly seek transformation.

Tech services, scene-based installments, overseas expansion—these are well-established “unprofitable” tracks in the industry. Lexin lacks first-mover advantages and sufficient resources; its so-called transformation efforts are merely desperate, blind attempts. Abandoning high-margin lending aid to shift toward low-margin tech services requires immense strategic courage and long-term capital and resource investment. To date, Lexin has not demonstrated the ability to do so, making its transformation path extremely difficult.

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

In fact, Lexin’s crisis is not just a company’s problem but a microcosm of the entire industry’s end of reckless growth. 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 lending industry relied on information asymmetry and regulatory loopholes to expand rapidly through high interest rates and leverage, but this coarse growth model is unsustainable. As regulatory frameworks improve, compliance becomes the industry baseline, and core competitiveness becomes the key to survival.

Without the shield of high interest rates, without scale expansion support, and without a reliable second growth curve, Lexin’s business story has reached its end. Under the dual pressures of compliance and profitability, this once-leading lending platform 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.