China plans to nudge tech giants including Ant Group, Tencent and JD.com to share consumer credit data to prevent over-lending and fraud. This is reported by Reuters, citing two informants familiar with the matter.
According to their sources, Chinese regulators, including the central bank, are planning to oblige Internet platforms to transfer credit data to some kind of nationwide structure overseen by the People’s Bank of China (PBOC). This structure will provide the obtained data to banks and other financial institutions so that they can adequately assess risks and prevent excessive borrowing.
If implemented, this plan will end the government’s policy of non-interference in the lending industry. Today, major online trading and financial platforms are slow to share credit data – a critical asset that helps them direct their business, manage risk and attract new customers.
The described measure is part of the government’s efforts to regulate the activities of Internet giants. The regulation is expected to reduce the scale and profitability of their lending business. Meanwhile, this area is a real cash cow, as tech companies charge banks high fees for servicing with the confidential data of a huge number of customers. For example, Ant has amassed data on more than a billion people using its super application Alipay, many of whom are young, Internet-oriented consumers who do not have credit cards or sufficient credit histories at banks. In addition, Ant has about 80 merchants in its database.
Ant operates one of China’s largest private credit rating platforms, Sesame Credit, which uses proprietary algorithms and methodologies to assess the creditworthiness of individuals and small businesses based on their use of Ant-related services. By providing limited information from this set of about a hundred banks, the company receives a commission from them in the amount of 30-40% of the interest rate on the loan.
Ant also lends itself: Ant’s consumer lending balance at the end of the first half of last year was $ 263 billion, or 21% of all short-term consumer loans issued in China.
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