Ant Financial, the finance arm of Chinese ecommerce group Alibaba, has launched a credit rating system which utilises the group’s vast amount of user data. The launch of Sesame Credit Management comes at time when the Chinese government is driving an initiative to expand financing for both consumers and small businesses.
The FT reports that the launch signifies Alibaba Group’s latest push into financial services and is a development that policy makers hope will drive the flow of credit to small, privately owned companies. These small companies make up a large majority of China’s economic growth and job creation but often struggle to obtain loans from banks that are owned by the state.
Alibaba was part of eight companies who were cleared by the central bank earlier this month to establish consumer credit operations. Sesame Credit will rate both consumers and small businesses. “Sesame Credit is focused on those who may have little credit history at traditional credit agencies. They may have never obtained bank loans or applied for credit cards. However, they might be active internet users who shop online a lot, e-pay their utility bills on time, have a stable residential status and have been using their mobile phone numbers for a long time,” said Yu Wujie, chief data scientist at Sesame Credit.
Chinese financial services have long been dominated by state-owned banks that mostly offer collateralised lending, which smaller borrowers often don’t have the collateral to meet. The lack the capability to assess credit risk for small businesses and consumers adds to the need for accurate credit assessment by other companies.
Alibaba, Fosun International and Tencent are among a group of ten companies that have been approved to set up privately owned banks aimed at smaller borrowers. The entrance of internet groups into Chinese financial services such as Tenant's privately owned, online-only bank, WeBank, has been hailed as one giant step for financial reform. Alibaba's private bank, Zhejiang Internet Commerce Bank, is also expected to start operations this year.
According to the FT, Sesame Credit will collect data from 300m users and 37m small businesses that use the Alibaba platform to buy and sell. Eric Jing, chief operating officer, Ant Financial said: “By leveraging the big data we have and the state-of-art technology we deploy, we believe the debut of Sesame Credit will not only enable credit providers to make holistic and accurate decisions, but will also empower merchants to provide more credit-related services.”
By Nicole Miskelly, bobsguide Lead Journalist