China as a pioneer in the new way of credit check
China is dwarfing Google or Facebook in data collection. It is known that the governance program foresees that each citizen should be controlled and either rewarded or punished in the event of misconduct by 2020 (1).
AliBaba, the consumer giant from the Middle Kingdom, owns in the Group both financial affiliates (Ant Financial) and a mobile payment platform (Alipay). After all, it brought Alipay in May 2018 to over 600 million users worldwide. The duo is completed by Sesame Credit, Alipay’s Chinese response to the credit bureau, and AliBaba now wants to extend the classic credit check to include social features – a gigantic vacuum cleaner is emerging on the horizon. (2)
- credit bureau in Germany also takes into account data on the social environment and not just on its own.
- In addition, AliBaba wants to take account of economic activities for the credit check, eg consumer behavior.
- In order to do better in the scoring of Ant Financial (AliBaba), for example, consumers would have to buy or lease more.
- The number of algorithms to calculate this score is estimated to be between 350 and 950.
Social patterns and social behavior – in Germany no credit criterion?
If you want to apply for a loan, you have to answer a few questions. This does not only include questions of marital status, income or other liabilities. The question of the employer and the industry appear obvious, but also affect the creditworthiness of the applicant. A game-hungry civil servant is better classified because of his immutability than a construction smith who has never had a cube in his hand.
It goes without saying that the bank would like to know the address. However, this is a socioeconomic criterion when assessing creditworthiness. What was the number of bad loans in the street or postal code district? If it is a multiple dwelling, did it cause any abnormalities among other residents? The Mortgage Credit Directive also included the possible future state of health in the credit decision.
Of course, these data are harmless compared to what Ali Baba plans, but so completely without taking into account the social environment, the banks in this country are not enough.
Economic activity plays a major role at AliBaba
AliBaba plans to include the economic activities of potential borrowers in the credit check. If you buy a lot, you will fare better than someone with only a small cash flow. Alipay makes this data collection easy for Sesame Credit. In addition to the complete recording of consumer habits, data on the social environment can be collected as soon as payment flows between private individuals arise.
The huge increase in e-commerce in China makes this possible, people permanently leave their traces of consumption on the Web.
So far, activities at AliBaba are still voluntary, with about 15 percent of users taking part. To increase the attractiveness, those who promote friends to participate, credited plus points. (3)
Tencent Holding was asked by the Chinese central bank to stop its competitor product to Sesame Credit. Obviously, the Chinese powers are not quite sure what to do in terms of surveillance, beyond the state activities, the country. (4)
Alipay repeatedly asserts that the data collected is in no way available to the authorities. It was only about making the economic life more comfortable.
The situation is different with the FinTechs. They know very well that user data, interpreted and used correctly, mean economic added value for the company.
The radiator control of Google Home through the app “tado” is of course handy. Also for Google. The group sees when the user is at home, when he watches TV, when he goes to bed, in short, which advertising makes sense for him in Google’s eyes.
Consumption becomes a competition
If you need a good credit rating at Ant Financial, you need to enter the competition. He has to buy or lease. But that alone is not enough. The seller or landlord should have good “social credits”, because these then turn on the buyer or tenant of a thing. This goal is best achieved through social platforms because it offers the greatest potential for people with high social credits.
“Social credits” and thus consumption become a competition in which it is necessary to win through downright blind actionism, that is, to improve its own ranking. While the number of underlying factors in a conventional credit check is rather clear, it is getting out of hand with the Chinese. No one knows exactly how many algorithms Sesame Credit uses, experts say it’s between 350 and 950.
The Chinese plans, whether they be state-owned or private, are causing massive skepticism among the rest of the world. This shows the stop of the acquisition of the US company MoneyGram international by Ant Financial. The Committee on Foreign Investment in the United States (CFIUS) had banned the $ 1.2 billion deal.
Sesame Credit also considers it critical that the data remains with the institution. They do not lie, as in Germany, with a change of the financial service provider, still with neutral place, the credit bureau.