China: Baidu makes strategic investment in US fintech firm Zestfinance

Visual of Zestfinance homepage. July 2016

China-based and NASDAQ-listed Internet search provider Baidu has made a strategic investment in US firm ZestFinance, a Los Angeles-based company that uses machine learning to transform vast amounts of complex data into credit scores. Financial terms of the investment are undisclosed.

The company in a media statement said that artificial intelligence (AI) experts and data scientists at both firms plan to work together to apply ZestFinance’s underwriting technology to Baidu’s search, location, and payment data in order to improve credit scoring decisions in China.

Said to be amongst the fastest growing financial technology startups in the US, the venture licenses its platform to companies across a variety of industries globally. It operates by runningdozens of mathematical models in parallel to make timely, accurate underwriting decisions, without human intervention.

Speaking on the transaction, Douglas Merrill, founder and CEO of ZestFinance, said, “At ZestFinance, our mission is to make fair and transparent credit available to everyone. This investment from Baidu will help further our mission, particularly in the fast-growing Chinese credit market. We’re thrilled to work with Baidu to turn search data into credit data.”

Given that mainland China sees a distinct lack of credit scoring systems, this is a crucial gap that needs to be filled as the Chinese economy grows amid concerns of a debt bust in China, with Baidu making this investment as a move to fill that gap and build a competitive advantage for itself.

China’s financial system lacks a centralised formal credit history database, with Beijing and other central governments worldwide making efforts to bridge the gap and extend financial services to their unbanked citizenry.

Also Read: Baidu beefs up financial services biz, hires former Lufax exec

China: Baidu’s movie arm invests $303m in new film fund

Chinese auto website Bitauto raises $300m from Tencent, JD, Baidu

The Chinese internet services major launched an online bank last year, as part of a move to expand its offerings and revenue base. However, some analysts state that it may be late to the game in making fintech investments.

In an interaction with TechCrunch, Merrill shared: “China interests me from a mission perspective. There are a lot of people who deserve credit but live in a cash economy [with] no formal banking service to serve them.”

In emerging markets such as China, consumer credit data is generally unavailable, as building consumer credit history is at a nascent stage. Baidu’s rich user search data will be valuable for loan underwriting and assessing credit risk.

The ZestFinance platform is highly applicable to emerging markets because it accurately underwrites people who lack credit history.

“ZestFinance’s unique ability to analyze and process complex, disparate data to make accurate credit decisions is very valuable to the Chinese credit market, where a centralized credit scoring system has yet to emerge,” commented Tony Yip, Global Head of Investment, Mergers and Acquisitions at Baidu.

He added, “ZestFinance will be an important technology partner for Baidu going forward, and we look forward to working together to help transform the financial services market in China.”

Also Read: Investor challenges Baidu on sale of video service to CEO

DCM Ventures raises $770m with backing from Baidu, Gree, Naver, SoftBank & Tencent

Circle raises $60m in funding round backed by Baidu, IDG

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.