Alibaba Group Holding Ltd's Sesame Credit Management ran a nationwide public beta of its credit-rating system last Saturday in what's seen as a vital step to commercialize the mainland's credit-rating system since the central bank gave the green light to eight private firms to provide personal credit reference services earlier this year.
The People's Bank of China's Credit Reference Center (CRC) is the mainland's official credit-rating system for both company and individual users, and its reports are based on personal information, loan records and other economic activity in finance organizations.
Sesame Credit, however, also uses other data to calculate the scores, such as a person's hobbies, interaction with friends, shopping habits and lifestyle.
These are people who have been largely left out by banks' traditional credit-rating methods, especially students, low-income workers and those who have never borrowed from a bank, according to Deng Yiming, director of Sesame's business development.
It is reported that Sesame adopted an international credit-rating method with a scale of 350 to 950 points, based mostly on their data on AliPay.
A higher score means a better credit history, which can make borrowing easier and carries with it added benefits.
People with 600 points above can use a shopping-credit system called "Just Spend" which allows users to take out a loan of less than 5,000 yuan ($805.9) when shopping on Alibaba's online market place Taobao. Those with more than 666 points can take a cash loan of up to 50,000 yuan.
The company launched ist "credit VISA" service last weekend, expanding the application range of its rating system. Users with more than 750 points can apply "credit VISA" to Luxembourg and those with 700 points can apply to Singapore, without requiring incumbency certification, hukou and other documents.
Sesame has also teamed up with peer-to-peer (P2P) lending companies which are starting to make use of big data analysis to control risks.
Simon Loong, founder and chief executive officer of Welab - a Hong Kong-based company providing online lending services - thinks that big data alone is not enough in the mainland's complicated Internet financing market.
Welab too launched its P2P lending platform in China in September last year, and has attracted loan applications involving more than 50 million yuan.
Before taking the plunge, Loong conducted a thorough study of the new market environment and concluded that risk control is a vital factor in his business,
"Given the fact that China's credit-reporting system is still in its infancy, those with the advantage of risk control technologies will benefit, while others have a high risk of failure," he said.
To cope with the verified population on the mainland, they have started to explore "smart data" analysis. "Smart data can reveal casual relationship, an important factor for risk control, but big data analysis can't," Loong said.
