Guinea-Pig Firms Slow to Help China Create Credit-Reporting System

(Beijing) — China is pushing ahead with its nationwide credit reporting system, but more than two years after the central bank opened the door for eight companies to collect and analyze data, not one of them has completed the trial program and obtained a license.

Sesame Credit Management Co., a subsidiary of Alibaba-linked Ant Financial Services Group; Tencent Credit Services; and Shenzhen Qianhai Credit Service Co. Ltd. were among the eight companies the central bank chose in 2015 to run personal credit reporting services. The People’s Bank of China (PBOC) originally gave the companies six months from January that year to prepare, and its decision to grant a license is based on how much the applicant company has achieved.

“The preparation the eight companies have made for running the personal credit rating business is far below market demand and regulatory standards,” Wan Cunzhi, the director of the PBOC’s Credit Information System Bureau, said Friday. “It’s fallen short of our expectations that none of them has made it yet.”

Though the eight companies are still beta-testing their personal credit scoring services, the PBOC will continue the approval process for firms seeking to become licensed personal credit reporting agencies, Wan said. Licenses will not be granted unless companies meet the requirements because doing so could create serious problems in the personal credit reporting market, Wan said.

Most of the eight companies are developing individual credit reporting services based on so-called big data technology, which will provide lenders, merchants and other users with a tool for assessing their customers’ creditworthiness. Consumers with higher credit scores will have access to benefits unavailable to those with lower ones — such as wavers for car rental deposits, or even higher chances of success in a blind date organized by match-making service providers.

Wan said that the eight companies have several major hurdles in common. Their respective individual credit scoring and reporting services based on internet technology aim to create a closed loop of their own business activities, which makes it hard to share personal credit data widely. Also, each of the eight companies is affiliated with a corporate company or group, which may create a conflict of interest when it comes to rating individual credit records. Wan also said the eight companies are not fully familiar with the rules governing the collection of credit information, and errors may arise in their credit reports.

The development of the credit reporting system in China dates back to 2006, when the central bank established the Credit Reference Center. The center is an independent credit information service tasked with operating a national commercial and consumer credit reporting system to enable financial institutions to assess borrowers’ creditworthiness.

Wan said that about 85% of the information about personal debts comes from financial institutions such as banks, securities brokerages and insurers.

Companies other than the Credit Reference Center are encouraged to engage in the personal credit scoring and reporting services, with a focus on consumers with limited credit records from commercial lenders and extracting data from areas that are not well-covered by the PBOC’s credit scoring system, such as the peer-to-peer lending sector, Wan said.

Contact reporter Dong Tongjian (tongjiandong@caixin.com)