How much longer will Xin’Lian shy away from the stage in China?

Xin’Lian, the new credit rating union, led by the NIFA (National Internet Finance Association of China), has made recent progress. Its official name is set to be “Bai Hang Zheng Xin” in Chinese, meaning its launch time is likely very close.

It is about time, and sorely needed. From November 2017 to December 2017, the bad loan rate on P2P and consumer loan platforms almost doubled. Especially after Mr. Luo Min, the CEO of Qu’dian, made argumentative comments of gifting the loan to borrowers who are unable to repay. Also, many borrowers started to share their borrowing experiences on social media - they believe if the borrowers can escape from a few tough days of “collection” period, the borrowed money would be off the lenders’ list and there would be I no need for it to be repaid anymore.

This is not totally false. Because the bad credit history on internet lending platforms is not recorded with the PBOC, China's central bank, it does not affect the borrowers’ future property or automobile purchases. What’s more, because there is no shared default information among platforms, the borrowers can move loans between many different lending platforms. Those who avoid paying their debts may hurt the consumer lending industry badly.

The small loan industry can really use the benefits of Xin’Lian. As we discussed before, Xin’Lian is led by NIFA, and eight other founding companies, including big names such as Sesame (Alipay), Tencent (Wechat), and Qian’hai (Ping’an). They all have stable data sources. Especially on platforms like Alipay and Wechat, consumers are able to use many different products: investment, taxi, takeaway, movie, travel, utility, and repayment for credit card, etc. With the vast amount of data from all different activities, the company can understand consumers more accurately.

As a result, the PBOC does not have the access to collect all the credit data in China, but the data from private companies is a great supplement to the PBOC's information. In the future, combining credit history from the central bank and Xin’Lian can be improved in China. For small loan companies, Xin’Lian can help them to build reliable risk control system. Those default borrowers will not be able to walk away without any punishments. For example, the government has issued certain punishments against someone who avoids paying his/her debt: restrict consumption, limit usage of plane and train, restrict property purchase, and even their children would be affected. Xin’Lian will help the internet finance industry to grow in a healthy way. The whole Chinese society will become more careful with personal credit history.

While Xin’Lian was expected to be introduced at the end of last year, there may be some concerns delaying the launch. For instance, how to ensure the authenticity of shared data? How to protect privacy? In the end, how to share the profits among different parties?

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