Alibaba Group Holding Ltd (阿里巴巴) is tapping into its vast records on the online spending habits of its users for a new purpose — to provide credit ratings on consumers.
On Wednesday, Ant Financial Services (螞蟻金融服務集團), a company run by Alibaba founder Jack Ma (馬雲), announced the launch of the Sesame Credit Management Group (芝麻信用管理), a credit-scoring business that is to rely primarily on online data. Alibaba shares in some of Ant Financial’s profits through a contract.
Ant Financial wants to attract the millions of Chinese who lack established, traditional credit histories.
Chinese consumers are notoriously frugal, with household savings rates among the highest in the world for a large economy. Lack of access to credit among consumers and small businesses is one reason.
“They may have never obtained bank loans or applied for credit cards,” Sesame Credit chief data scientist Yu Wujie (俞吳杰) said in a statement. “However, they might be active Internet users who shop online a lot, e-pay their utility bills on time, have a stable residential status and have been using their mobile phone numbers for a long time. We will take these and other factors into consideration when assessing consumers’ creditworthiness.”
The availability of information on creditworthiness is another barrier to promoting consumer borrowing, which does not have robust rating systems such as the US’ FICO scores. As of September, only 436 million domestic credit cards were in use in China. While the People’s Bank of China maintains a credit reference center with 850 million people on its database, that information can be limited, and most of it comes from banks.
The new venture is the latest example of how Ma, 50, is shaking up China’s state-dominated financial system. Sesame Credit is one of eight new privately owned credit-scoring businesses that were given preliminary approval this month by China’s central bank. The Chinese Communist Party has been trying to decrease China’s reliance on debt-fueled investment as the economy’s main driver of growth, hoping to shift greater importance to consumer demand.
To determine credit scores, Sesame Credit is to partly use the spending and savings behavior of Ant Financial’s more than 300 million real-name registered users — equivalent to nearly a quarter of China’s population. It also plans to tap into data on 37 million small businesses that buy and sell goods on Alibaba’s shopping Web sites, including Taobao.com (淘寶), and Tmall.com (天貓).
It is to have access to payment histories on Alipay.com Co (支付寶), an online payment service similar to eBay Inc’s PayPal finance unit, as well as information about investors in Yu’E Bao (余額寶), an online money market fund that pays higher returns than a bank savings account and has about 150 million users.
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