Snooping in the Bathroom to Assess Credit Risk in China
KUNSHAN, China — Banks and other lenders typically look at borrowers’ credit histories, tax forms and other financial information to determine whether they will get paid back. In China, lenders also look at their bathrooms.
Lenders have to be creative. As the economy slows, the government wants to nurture a credit culture to get Chinese families spending instead of saving.
But judging creditworthiness is tricky in a country where cash reigns, fraud is rife and even the most basic details can be difficult to verify. Despite China’s size and wealth, most people have never taken out a mortgage or used a credit card, so lenders often have little reliable information about potential borrowers.
To fill the gaps, one upstart lender, China Rapid Finance, supplements data analysis with on-the-ground spade work. The company’s investigators, in more than 90 cities, check for the number of toothbrushes or towels to determine how many people are living in a house. They look for dirty dishes in the kitchen. They take photos of a potential borrower at work to confirm employment status.
为了填补这一空白，信贷界新晋企业信而富(China Rapid Finance)以实地调查作为数据分析的补充。该公司遍布90多个城市的调查人员，会通过牙刷或者毛巾的数量来确定一套房子里住着多少人。他们会进厨房寻找脏盘子。会为潜在借款者拍摄工作照，以确认其就业状况。
A growing number of companies are trying to crack the credit code in China. The internet giants Alibaba, Tencent and Baidu are developing credit scoring systems based on users’ online transactions and search histories. Another niche lender, Jubao Internet Technology, plugs dozens of variables into its proprietary credit formula, including whether borrowers use their social media accounts to connect with celebrities.
“This is probably the largest untapped consumer finance market globally,” said the founder and chief executive of China Rapid Finance, Zane Wang, who spent years as the head of analytics at the credit arm of Sears, the American retailer.
Getting credit right is crucial to China’s economic plans. The government is trying to bolster consumer spending to help offset the sharp decline in the smokestack industries that previously helped power the country’s ascent. China will need to increase the use of credit to make it easier to spend, while at the same time avoiding the pitfalls that come with too much debt.
Shifting generational dynamics will play a big role, as China’s millennials are much more likely to use credit than their scrimping and saving parents. But lenders will also need to put the right products in their hands.
While the country’s wealth has swelled, the financial system has not kept pace.
Most consumers lack access to credit cards, loans and other traditional products offered by banks. The World Bank estimates that 79 percent of China’s population above the age of 15 have bank accounts, while only 10 percent have ever borrowed from the formal financial system.
China’s banks have a modest consumer lending business. But they typically favor making loans to big state-owned companies.
Instead, online lenders are emerging as the pioneers, catering to China’s rising consumer class. Alibaba’s financial affiliate makes small loans to online shoppers and vendors on its e-commerce platforms. JD.com offers loans for small purchases and education-related expenses. Peer-to-peer lenders match investors with consumers, small businesses and other borrowers.
They are trying to attract the next generation of spenders like Mao Yiting, a researcher at the local antiquities bureau in the coastal city of Haining.
Ms. Mao, 27, has never had a credit card or taken out a loan. But she regularly borrows small amounts of just over $90 from Huabei, a consumer lending business started by the Alibaba affiliate Ant Financial. She uses the money to pay for online purchases like books, dog food, or ingredients for the dessert recipes she likes to cook.
“I always pay the debt on Huabei on time,” said Ms. Mao, who repays the money in installments. “It’s more convenient than the credit cards issued by banks.”
But online lending in China still has a Wild West aspect — for both the lender and the borrower.
Peer-to-peer platforms have proved hugely popular in China, with outstanding loans of more than 600 billion renminbi ($90 billion), according to figures compiled by Moody’s Investors Service and Wangdaizhijia. But the industry’s reputation has been marred by scandal, like the collapse of Ezubao, which authorities called a $7.6 billion Ponzi scheme.
事实证明，个人对个人平台在中国极受欢迎，来自穆迪投资者服务公司(Moody’s Investors Service)和网贷之家的数据显示，此类平台的未偿贷款额突破了6000亿人民币（约合900亿美元）。但这个行业的声誉却因E租宝倒台之类的丑闻而蒙羞。当局称，E租宝制造了一个76亿美元的庞氏骗局。
After that, regulators have stepped up their oversight of online lenders, including setting caps on the amounts that can be borrowed. The regulators’ tightening grip is “something like a shepherd gradually herding his sheep into an increasingly narrowing pen or chute,” said Mark Natkin, the founder and managing director at Marbridge Consulting, based in Beijing.
那之后，监管机构加强了对网贷平台的监管，采取了设定贷款额度上限等举措。其收紧控制之举“有点儿像是牧羊人把羊群逐渐赶进越来越窄的羊栏或者溜道，”总部设在北京的迈博瑞咨询有限公司(Marbridge Consulting)的执行董事马克·纳特金(Mark Natkin)说道。
The lenders themselves are entering a financial black hole, with little to no credit history on potential borrowers.
In the United States, the Big Three credit bureaus — Equifax, Experian and TransUnion — compile borrowing and repayment records to create so-called FICO scores. Financial institutions rely heavily on those scores to make lending decisions.
China lacks a direct equivalent. The central bank’s main database includes personal credit history data on less than a third of the country’s population.
“Compared with the broad consumer base, there is still lots of room to go,” said Paul Wang, a co-founder and the chief executive of Happyfi.com, a Shanghai start-up that guides online lenders on risk management.
Without a more complete depository of information, the industry is finding new ways to build those histories.
WeLab, an online lender, uses data collected on mobile phones, with the permission of users, to automatically process hundreds of details about potential borrowers’ habits, online and offline. When deciding whether to lend money, it becomes granular, like the time of a day a loan application is submitted. Those filed from 1 and 6 a.m. have a higher correlation with repayment default, according to Simon Loong, the founder and chief executive of WeLab.
“Getting efficient access to cheap lending is still a fundamental way of how people improve their quality of life,” said Mr. Loong, a banking veteran whose start-up has backing from Li Ka-shing, the Hong Kong billionaire, and Sequoia, the Silicon Valley investor.
China Rapid Finance draws on transaction data and other records from dozens of internet companies, including Baidu and Tencent. The company feeds this raw data into its own algorithms to identify potential customers.
Based on that information, the company first gives out small, preapproved loans to build a credit history. China Rapid recently teamed up with Tencent’s QQ messaging platform to offer loans of $75.
After a borrower repays several loans, the company then hands out bigger amounts. At that point, the company’s investigators step into the mix to vet borrowers further.
One applicant, the company said, wanted to borrow 100,000 renminbi for 18 months at an annual interest rate of 2.89 percent. The applicant, a 28-year-old single man from Changchun, wanted the money to renovate his home.
It did not pass muster. On inspection, the company found that the applicant had stayed at what he claimed was his residence for only three days. His stated employer had no record of him.
”We need to have a mechanism to check and verify,” said Mr. Wang of China Rapid Finance. “We have to start somewhere.”