source from:FT August 15, 2016 1:49 am China lenders look at social media contacts to assess risk
Yuan Yang in Beijing
Visitors at a Beijing internet conference use the WeChat payment system
A leading online lender in China has revealed the unorthodox extent to which the country’s booming fintech sector uses personal information to assess credit risk — including examining social media contact lists.
“If we find you are [social media] friends with celebrities from the entertainment or finance industries, we think you must be to some extent trustworthy . . . since otherwise you wouldn’t have such friends,” said Jesse Chen, co-founder of Jubao Internet Technology, one of China’s top three peer-to-peer lending firms.
Jubao, along with Tencent, is among a new wave of Chinese online finance firms using social media data to assess credit risk.
Jubao gets much of its data through being a subsidiary of one of China’s biggest conglomerates, the aviation-centred HNA Group. “We have information on about 100m people from our insurance, travel, airline, and shopping services,” Mr Chen said.
Such information can be highly valuable in a country where credit data are patchy and not easily accessible.
Traditional credit rating data, made up of banks’ records of loan defaults and repayments, are held by the central bank.
This was previously only accessible by banks, but last year the central bank gave approval for eight companies including Tencent and Alibaba to access the database.
“If you aren’t one of these big companies, you have to enter a partnership with one to get access to credit data,” said Wang Xiaoyan, a consultant at tech-focused equity research firm 86 Research.
Furthermore, the central bank’s database has poor coverage, particularly of low-income borrowers and SMEs. Mr Chen estimates that it covers a third of China’s population.
As a result, said Jiazhuo Wang of the City University of New York, “many online lending platforms are looking for an alternative way to conduct due diligence”.
Clients can give Jubao access to their social media data with a keystroke, by linking their Jubao account to their WeChat account — a mobile messaging service — or their Weibo account — an online platform similar to Twitter.
In the US, regulatory pressures concerning privacy and the potential for discrimination have led online lenders to draw back from using Facebook activity to assess risk.
But in China, “the P2P sector is relatively unregulated, and so all sorts of new methods are being tried out,” said Ms Wang.
This was previously only accessible by banks, but last year the central bank gave approval for eight companies including Tencent and Alibaba to access the database.
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