Personal Credit Reporting System Shapes up
Mar 11-2021
Pudao Credit Co., Ltd. saw its day on February 2nd, 2021, making it the second market-oriented personal credit agency in the country. Its establishment, almost three years after the founding of the first one – Baihang Credit, testifies to a new development phase in China’s personal credit system and will impact hugely on digital financial businesses such as consumer finance, big-data risk control, digital credit and loan-facilitating services, writes Prof. Huang Zhuo of the NSD in a commentary.
Before 2015, China’s personal credit system had been government-driven and seen the establishment of a PBOC-affiliated agency and the promulgation of various regulations. The rapid growth of internet finance over the last decade has put new demands on the credit reporting system, as the PBOC agency mainly targets the loaning businesses of traditional financial institutions and has limited coverage of long-tail users and credit information.
An official guideline released in 2015 paved the way for the birth of Baihang Credit three years later, with 36% of its shares held by the China Internet Finance Association and the rest evenly spread among eight private firms. By 2020, Baihang had counted 1,887 financial institutions as partners and recorded the credit information of 163 million residents.
Pudao Credit is 35% held by Beijing Financial Holdings Group - a state-owned institution, 25% by JD Digits, 17.5% by Xiaomi, 17.5% by Beijing Megvil, and 5% by a limited partnership firm. The last four represent various credit-related aspects: usage scenario, data, and technology, says Prof. Huang.
There are signs that China’s personal credit system will continue its marketized process and more agencies can be expected to come forth to form a multi-leveled, diversified system. On account of the vast market demand and solid foundation in the digital economy and digital finance, China’s personal credit reporting industry might be able to leapfrog and join the leading ranks of the world, argues Prof. Huang.
He also believes that the regulatory system will keep improving, and big-data risk control agencies and loan-facilitating agencies might evolve along two paths: some might manage to receive a license for personal credit businesses and thus can legally offer risk-control services to financial institutions, while others might not get the qualifications and can only take comfort in offering such services to financial institutions: driving customer traffic or providing technology solution for risk control.
