Getting accurate and complete credit information and history on consumers and businesses has always been tricky in China. Credit records can be incomplete or inaccurate and credit databases are often not consolidated. Mobile phone statements were often used as proxies for consumer credit as they were the best existing representation of a consumer's ability to pay. Even banks themselves only started to have internally consistent customer information a decade ago.
In some cases, companies may not even have access to the credit databases. We have been told that many of the P2P lending platforms in China are unable to obtain access to the national databases.
Ant Financial's existing consumer and business transaction information sourced through Alibaba's other platforms like Alipay and Taobao gives them an extensive amount of existing transaction information and credit profiles that would give them an incredibly rich overview of a person or company's financial history.
Although Sesame Credit is positioned as a solution for a swath of China's consumers who have never had a loan or credit card in the past, it could have a much wider application in the future. The service, along with other competing services that we will likely see launched in the next couple weeks or months, will likely give us greater insight into consumer and business credit scoring than many of the existing products or services on the market today. I could see banks using this as their go to source of information for, as an example, making decisions on an existing consumer's credit card limit as it will give them additional information about their customer that they wouldn't have had access to before.
More interestingly, the product is leveraging big data. Although seen by many (including myself at one point), as incredibly buzzy and without too much substance, we are finally seeing public examples of how financial institutions, and increasingly tech companies themselves, are leveraging big data to provide better products and services to customers.
Over the next few weeks we'll take a look at a number of products out there based on big data and look at where they might take the industry in the future.