WeChat Pay pilots credit-scoring rival to Alibaba's Sesame

January 14, 2019 13:19
A notice promoting Tencent's WeChat Pay is displayed at a restaurant in China. The mobile payment service biggie is testing its own credit scoring feature, WeChat Pay Points. Photo: Reuters

Chinese social media and gaming giant Tencent (00700.HK) has started testing a consumer credit scoring system on its payment service WeChat Pay, taking on a rival service linked to arch-rival Alibaba Group’s Sesame Credit.

According to plans unveiled at the WeChat Open Class Pro event, Tencent is said to be piloting a credit data feature called "WeChat Pay Points", which considers personal connections on the social media platform, as well as spending behavior, among other things, to determine a user’s credit rating.

According to Chinese media reports, the credit data system will mine users' data based on three major dimensions: identity, which is the person’s real-name information; consumption, which is the person’ spending history from WeChat Pay service; and credit history, which is the contractual obligation and payment history via WeChat Pay.

Under the WeChat Pay Points system, credit scores of a person's friends and personal connections on the WeChat platform will be taken into consideration to calculate the individual's credit scores.

Similar to its rival Sesame Credit, WeChat Pay’s credit data system rewards high score users with deposit-free offering for third-party services such as hotel booking, bike-sharing, and power bank-sharing.

To merchants, WeChat Pay Points provides them with features including user identification for credit risk and payment collection, in order to reduce merchants' bad debt rate.

Without disclosing the scoring range, users with more than 800 points are reportedly considered high scores. Chinese media reported that a domestic power bank-sharing service has waived the 99 yuan deposit for users with WeChat Pay Points score reaching 550.

WeChat Pay Points is now linked to WeChat’s “mini-apps”, which are mini mobile applications that are built into the WeChat platform and developed by third-party businesses.

According to reports, the credit scoring feature has piloted in multiple cities in Guangdong province, China, since last November, and the test is said to have been expanded to users in cities such as Beijing, Shanghai, and Shenzhen.

The company aims to roll out the feature to its billion-plus users across the country this year.

China has flagged plans to roll out a system that will allow government bodies to share information on its citizens’ trustworthiness and issue penalties based on a so-called ‘social credit score’, following President’s Xi Jinping’s initiative to build a social credit system based on the principle of “once untrustworthy, always restricted.”

The country has established the Credit Reference Center, a centralized credit scoring system. Starting last year, authorities have applied it to flights and trains, barring people who have committed misdeeds from taking such transport for a certain period of time.

While the government’s credit data system covers around 300 million people, authorities have issued permits to China’s private tech firms to develop credit-scoring platforms, with an aim to extend the coverage of consumer credit scoring in the country.

In 2015, the People’s Bank of China (PBoC) -- the nation's central bank -- gave green light to eight private firms to develop their own private credit score platforms. The entities included Alibaba, JD.com, and Tencent.

As the first mover, Alibaba launched -- via its financial services affiliate Ant Financial -- the consumer credit-scoring system, Sesame Credit. It factors in users’ payment histories from Alibaba’s online payment service Alipay and shopping patterns on Taobao, Alibaba’s online marketplace, rating users on a score scale of 350 to 950.

Shortly after the launch of Sesame Credit, the country’s No.2 e-commerce firm JD.com also launched a consumer credit data system, via a joint venture with US credit-scoring technology company ZestFinance, which analyses JD.com’s online shoppers’ data and churns out a credit risk score.

However, Reuters reported in 2017 that the PBoC had quietly pulled back its support for private credit scores, as regulators fear the initiatives may threaten data security and create conflicts of interest.

On January 30 last year, Tencent announced a nationwide pilot test for its own credit rating system, namely Tencent Credit, which considers five elements including social connections, risk, wealth, contractual obligation, and consumption behavior, rating users between 300 and 850 points.

But the pilot test was halted the next day after its debut, with no explanation or update offered by Tencent. Chinese media outlet Caixin reported that the shutdown of the pilot test was instigated by the central bank, amid concerns over potential abuse of consumers’ credit information.

Market observers have seen the testing of WeChat Pay Points as Tencent’s return to credit scoring field one year after the shutdown of Tencent Credit.

Given that the mobile wallet WeChat Pay was launched only in 2013, it took time to collect and aggregate a huge pool of payment data to build the in-house credit data system, and that is why Tencent has been a latecomer in the consumer credit data field, a WeChat representative has said.

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