Credit? They have your number

Database will lay stronger foundation for personal financial transactions, experts say

A broad-based, market-oriented personal credit database is being developed in China with the participation of institutions outside the traditional banking sector, the central bank says.

The People's Bank of China said in a statement that it had told eight non-bank institutions they should be ready to conduct personal credit information operations within six months. The companies include subsidiaries of Internet giants Alibaba Group Holding Ltd and Tencent Holdings Ltd.

Financial researchers says the effort will promote the development of credit information and lay a stronger foundation for personal financial transactions.

Yang Tao, a researcher at the Institute of Finance and Banking at the Chinese Academy of Social Sciences, says: "The credit information system established by the central bank does not cover all the daily behavior that could reflect personal credit. Today, an increasing number of transactions and payments is done through e-commerce platforms and various terminals of third-party payment companies. They all leave traces of information to support credit evaluation by commercial banks."

According to the People's Bank of China, there were 436 million credit cards in use in China on Sept 30. The country's total population is 1.36 billion.

As many people do not have such cards, commercial banks can only provide limited information on their credit, which makes it hard for these consumers to obtain loans, Yang says.

"The expansion of credit information collection will play a big role in improving personal credit scores, making it easier for consumers to receive loans and boosting the growth of consumer finance," he says.

"It will also help alleviate the financing difficulties small businesses face and reduce their financing costs."

Wu Qing, deputy director of banking research at the Development Research Center of the State Council, says Internet companies such as Alibaba and Tencent can rate personal credit based on big data analysis. That will compensate for the weakness of commercial banks.

"Although banks are also using big data and have their own credit information systems, they do not make the best use of it, nor are they strongly motivated to dig into the big data. But they will be prompted to do so by newcomers who will join the market soon."

He advises the government to do more to protect the privacy and security of personal information.

Personal credit information collected by the People's Bank of China comes primarily from financial institutions. It mainly includes personal identity information, bank credit records and information on overdue debt.

On the Internet, personal credit information can be collected around the clock. It includes data from a wealth of sources such as Internet banking, e-commerce, social networking, matchmaking, social security and traffic and transportuse.

Using big data, information including online spending, speed of payment to merchants and how often you return your purchases can be analyzed and become part of your credit score.

On June 30 last year the People's Bank of China had personal credit information on 850 million individuals, far short of the entire population.

jiangxueqing@chinadaily.com.cn

(China Daily Africa Weekly 01/09/2015 page21)