Tencent’s new credit system to use payments, social data

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As China continues to race towards a cashless society with mobile payments, its tech giants are playing an important role in shaping the future of consumer credit – especially in a country where only about a third of the population has a credit history.

Yesterday, Tencent launched its own credit system, Tencent Credit, to all Chinese nationals who use WeChat or QQ. Both chat apps are operated by Tencent, and each has more than 800 million monthly active users.

Depending on users’ scores, which can range between 300 and 850, they can access a number of different services and perks, including waiving deposits for housing rentals in Shenzhen, using WeChat to ride the metro, and renting Mobike bikes free for a month. Some of these offers, however, are limited to certain cities.

If your friends have high morality, then your credit should be good, too.

In the future, users will also be able to borrow up to US$47,600 in loans via Tencent Credit, using the company’s microloan service Weilidai. The loans are backed by WeBank, Tencent’s “internet bank” – there are no physical branches.

Similar to Sesame Credit, Ant Financial’s proprietary credit score, Tencent Credit scores users according to five broad metrics: honor, security, wealth, consumption, and social (Editor’s note: This is Tech in Asia’s translation, not Tencent’s). According to Tencent, these categories include mobile payment transaction data from WeChat Pay and QQ Wallet, information about financial assets and repaid loans, as well as data on the quality of the user’s social network.

Third-party data sources, such as telecom operators, financial institutions, and government departments, will also contribute to a user’s credit score, according to the service’s terms and conditions.

We have reached out to Tencent to clarify details around their scoring system but have yet to hear back.

Credit race

Tencent is one of eight companies that the People’s Bank of China (PBOC) approved for credit score piloting in 2015. Ant Financial’s Sesame Credit, which launched that year, was one of the earliest systems to go online.

Unlike the country’s traditional financial institutions, tech companies have reams of consumer data, including online purchase habits, social media, and travel data. By using big data to calculate credit scores – instead of data points like car loans and housing mortgages – and automate loan approval, fintech firms have been able to offer small-ticket loans to more consumers.

See: How fintech startups are using big data to solve China’s credit gap

However, none of the eight companies have passed the scrutiny of regulators so far. Government officials remain doubtful about the objectivity and fairness of systems like Sesame Credit, as they’re tied closely to the companies’ core businesses. Last year, the Chinese government set up a national clearinghouse for online payments, which could force competing mobile wallets Alipay and WeChat Pay to share data with traditional banks.

According to Ant Financial, Sesame Credit has 520 million users as of 2017. The company claims Sesame Credit helped 41.5 million of those users waive deposits worth more than US$63.6 million in total. Tencent Credit will have a lot of catching up to do, especially since Sesame Credit can leverage Alibaba’s ecommerce data.

“Overall, Sesame Credit has an advantage when it comes to the data and application side, but Tencent Credit’s speed of development has been very fast,” Tian Jie, finance analyst at research firm Analysys, tells Tech in Asia. In particular, when it comes to credit scoring, certain data points are more efficient than others, such as lending and online purchasing habits.

In that sense Sesame Credit, which partners with various online lending companies, such as Qudian, has an edge over Tencent, he explains. “There are also limitations on how much social data can be used for credit,” though Tencent Credit definitely has potential in the future, given the enormous user base of social applications, he adds.

Tencent CEO Pony Ma expressed his interest in using social data for credit scoring as early as 2013. During a speech at a Tencent conference that year, he told audience members: “In the future, perhaps there will be a ranking system for morality. It will determine how much money you can borrow.”

“If your friends have high morality, then your credit should be good, too. Otherwise, they naturally wouldn’t become friends with you,” he continued, comparing this ranking system to PageRank, the algorithm Google Search uses to score webpage relevance. “This is something we’re imagining, but we’re still in the early stages of research.”

Currency converted from Chinese yuan. Rate: US$1 = RMB 6.29.

This post Tencent’s new credit system to use payments, social data appeared first on Tech in Asia.

from Tech in Asia https://www.techinasia.com/tencent-credit-launch
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