China Gives Green Light to First Government-Led Personal Credit Scoring Firm
Wang Ying
/SOURCE : Yicai
China Gives Green Light to First Government-Led Personal Credit Scoring Firm

(Yicai Global) Feb. 28 -- China's central bank, the People's Bank of China, has officially issued the first domestic personal credit scoring license to the state-led Baihang Credit Scoring Co. which partnered with domestic major credit scoring institutions backed by such internet giants as Alibaba Group Holding Ltd., Tencent Holdings Ltd. and NetEase Inc.

The new platform will mainly provide clients with personal credit information collected from online lending institutions, as well as consumer finance and microcredit companies, Yicai Global learned. The national internet finance association of China holds 36 percent stake in the new firm while the remaining eight credit agencies under pilot hold 8 percent each. 

As Alibaba, Tencent and Ping An Insurance of China each owns a large database, they are regarded by market as three major leaders among these institutions.

Baihang Credit is a market oriented personal credit reference institution established under the guidance of the central bank. It mainly carries out personal credit scoring activities for online lending outside traditional financial institutions such as banks, securities and insurance institutions, complementing with the government financial credit information database operated by PBOC,  said the central bank when describing the business objectives of the new firm in a statement last month when approving establishment of it.

Privacy Policy Versus Data Collaboration

Baihang Credit will initially focus on collecting lending related data, but due to independence and privacy policy of the company, data will be collected on a voluntary basis, Yicai Global learned.

In response to a Yicai Global question of whether Zhima Credit and its other related lending data would be available to Baihang Credit, sources from Ant Financial Services Group only said that they would like to use their own technology capacity to work with other agencies to support Baihang Credit.

At present, the number of agencies submitting data to Baihang Credit has reached more than 100, Yicai Global found.

As for why the central bank chose to issue a credit reference license to only state-led Baihang Credit instead of issuing it to all of the major credit rating agencies, China Rapid Finance Ltd. CEO Zane Wang told Yicai Global that the main reason is that Baihang Credit can meet the requirements in two areas. The firm can be "independent and focused," and deal with credit issues without breaking the rules of the game. On the other hand, it has a relatively safe data standard to ensure no loss during transmission and that sensitive ones will not be leaked.

Previously, those eight credit rating agencies have developed a wide range of credit scoring products, but they have been repeatedly suspended by regulators for various reasons.

A New Model

Baihang Credit "36 +8 x 8" equity composition model clearly expresses the intention of the central bank in two aspects, insiders told Yicai Global. On one hand, the eight agencies participated in Baihang Credit will be treated equally irrespective of their background. Baihang Credit's decisive role, on the other hand, rests with the majority shareholder, the state-backed national internet finance association of China.

"Eight percent of the shares is purely equity participation without involving business operations but only for financial investment. In other words, although Baihang Credit was formed as a commercial company, it will not aim to pursue the highest commercial interests," an insider said. The eight pilot institutions that took part in Baihang Credit will gain the opportunity to approach industry regulators. Because they clearly know that this much stake doesn't provide any decisive right, but only a symbolic "signature right," an executive close to Baihang Credit told Yicai Global.

"A credit rating agency will not offer its data resources if it cannot get a credit reference license," a veteran of the credit rating industry once told Yicai Global after the establishment of Baihang, referring to the huge value of databases.

For the foreseeable future, the regulators' attitude towards the businesses already conducted by the eight pilot credit agencies will be that they can still carry out commercial activities combining different financial and life scenarios, but they cannot call themselves credit rating agencies, the same source added.

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Keywords: Consumer Credit History , Business License , Fintech , Central Bank , National Internet Finance Association of China , Joint Venture , Alibaba , TENCENT