China may push tech giants Ant, Tencent, others to share consumer credit data

Photo: REUTERS/Jason Lee/File Photo

China plans to push tech giants including Ant Group, Tencent and JD.com 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 and is another sign of attempts to rein in the country’s technology champions. 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, the People’s Bank of China (PBOC), plan to instruct internet platforms to feed their vast loan data to some of the nationwide credit agencies, the two sources said.

The agencies, which include the PBOC’s Credit Reference Center, China’s main, centralized credit scoring system, and the central bank-backed Baihang Credit, the country’s first licensed personal credit agency, will share the data more widely with banks and other lenders to adequately evaluate risks and prevent over-borrowing, the people said.

Ant and Tencent declined to comment.

JD.com and the PBOC did not immediately respond to requests for comment.

The two sources declined to be identified as they were not authorised 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.

“China seems to be making the unpopular, albeit right choice to sacrifice the current closed loop mentality financial paradigm in favour of a broader digital identity framework with potentially better access and greater efficiency in the long run,” said Alex Sirakov, founder of AquariusX, a Shanghai-based consultancy.

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 $37 billion IPO in November.

Since then, the regulators have launched an antitrust probe into Ant’s former parent Alibaba 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,” said one senior regulator.

“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.”

Customer creditworthiness

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 super-app Alipay, 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 Zhima Credit which means “Sesame Credit” in English, 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%-40% cut, on average, of the interest on loans it facilitates, analysts estimated.

Ant’s consumer lending balance stood at 1.7 trillion yuan ($263 billion) as of the end of June, accounting for 21% 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 has operated consumer-loans unit Weilidai since 2015, which made over 460 million loan drawdowns worth a total of more than 3.7 trillion yuan as of the end of 2019, according to WeBank’s 2019 annual report.

JD.com’s fintech arm, JD Digits, operates two platforms – Baitiao and Jintiao – 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 2020.

Jintiao facilitated consumer loans worth only 261 billion yuan in the same period of last year, as per JD Digits’ prospectus.

Reuters

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.