China plans to push tech giants, including Ant Group Co (螞蟻金服), Tencent Holdings Ltd (騰訊) and JD.com Inc (京東), to share consumer loan data to prevent excess borrowing and fraud, two people with knowledge of the matter said, in Beijing’s latest tightening of scrutiny.
The plan, if implemented, would effectively end the government’s laissez-faire approach to the industry. Large Internet platforms have tended to resist handing over their data, a crucial asset that helps them run operations, manage risk and lure new customers.
Chinese regulators, including the central bank, plan to instruct Internet platforms to feed their vast loan data to some of the nationwide credit agencies, the people said.
The agencies, which are run or backed by the People’s Bank of China (PBOC), would share the data more widely with banks and other lenders to adequately evaluate risks and prevent overborrowing, the people said.
Ant and Tencent declined to comment.
JD.com and the PBOC did not immediately respond to requests for comment.
The people declined to be identified, as they were not authorized to speak to the media.
Details of the regulatory proposal to include Tencent and JD.com in the loan data sharing arrangement have not been reported.
The plan adds to recent proposals to sharpen scrutiny of the technology champions and rein in empire-building, mainly in the financial sector; the shift helped bring about the dramatic collapse of fintech giant Ant’s US$37 billion initial public offering (IPO) in November.
Since then, the regulators have launched an antitrust probe into Ant’s former parent, Alibaba Group Holding Ltd (阿里巴巴), and ordered the fintech company to shake up its lending and other consumer finance businesses.
The latest regulatory proposal for Internet companies also comes as Beijing grows wary of loose risk controls at banks, mainly smaller ones, in terms of consumer loans and their excessive reliance on platforms such as Ant to find customers.
“Smaller banks are generally in a weaker position when they partner with fintech giants like Ant. They have heavily relied on Ant’s data to underwrite loans and manage risks,” one senior regulator said.
“When defaults happen, they have to shoulder most of the losses,” said the regulator, who declined to be named because of the sensitivity of the matter. “It’s crucial for lenders to have better access to more comprehensive and detailed credit data on borrowers.”
The latest regulatory attempt would likely dampen the scale and profitability of tech majors’ credit businesses. That area is a cash cow, as the companies levy high service fees on banks in exchange for access to millions of customers using propriety data.
Via its Alipay (支付寶), Ant collects the data of more than 1 billion people, many of whom are young and Internet-savvy users without credit cards or sufficient credit records with banks, as well as 80 million merchants, according to the company’s prospectus and analysts.
Ant runs Sesame Credit (芝麻信用), one of China’s biggest private credit-rating platforms, with proprietary algorithms and methodology that score people and small businesses based on their use of Ant-linked services.
The firm offers limited borrower information to about 100 banks, and takes the so-called “technology service fees” — a 30 to 40 percent cut, on average, of the interest on loans it facilitates, analysts estimated.
Ant’s consumer lending balance stood at 1.7 trillion yuan (US$263 billion at the current exchange rate) as of the end of June last year, accounting for 21 percent of all short-term consumer loans issued by Chinese deposit-taking financial institutions, according to its IPO prospectus and PBOC data.
Compared with Ant, rivals Tencent and JD.com run relatively smaller consumer-credit business.
Tencent’s private lender, WeBank (微眾銀行), has operated micro-loans unit Weilidai (微粒貸) since 2015, which made more than 460 million loan drawdowns worth more than 3.7 trillion yuan as of the end of 2019, according to WeBank’s annual report.
JD.com’s fintech arm, JD Digits (京東數科), operates two platforms — Baitiao (白條) and Jintiao (金條) — which had a combined 70 million annual active users and took in a total of 4.4 billion yuan in technology service fees during the first half of last year.
Jintiao facilitated consumer loans worth 261 billion yuan in the same period of last year, JD Digits’ prospectus showed.
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