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China’s Alibaba launches big data credit score

Kelly Dilworth

Qualifying for a new loan is about to get easier for the millions of Chinese computer users who don’t yet have a credit card, but regularly go online to shop, pay bills and invest their personal savings.

The Chinese e-commerce behemoth Alibaba announced Wednesday that it’s launching a brand-new scoring service for Chinese borrowers called Sesame Credit. But unlike traditional credit scores that take into account borrowers’ payment histories, Alibaba’s new score will use consumers’ online activities to rate their creditworthiness.

“Sesame Credit is focused on those who may have little credit history at traditional credit agencies,” said the group’s chief data scientist Yu Wujie in a statement. “They may have never obtained bank loans or applied for credit cards. However, they might be active Internet users who shop online a lot, e-pay their utility bills on time, have a stable residential status and have been using their mobile phone numbers for a long time.”

According to the group’s Jan. 28 announcement, the score will take into account a large swath of consumer spending and payment information provided by Alibaba’s mega-popular e-commerce platforms, including its Paypal-like payment service, Alipay, and its heavily used online marketplaces, Taobao Marketplace and TMall.com. In addition, the score will factor in data provided by public agencies, financial institutions and other merchants, as well as users’ browsing activity and social media contacts.

“By leveraging the big data we have and the state-of-art technology we deploy, we believe the debut of Sesame Credit will not only enable credit providers to make holistic and accurate decisions, but will also empower merchants to provide more credit-related services,” said Alibaba’s Eric Jing in a statement.

A matchmaker for money-savvy singles?
Alibaba’s goal of using nontraditional data to score underbanked consumers is similar to the goals of many U.S. companies that are also using nontraditional data to score people.

For years, companies such as FICO, VantageScore and CoreLogic have been experimenting with nontraditional data, including rental and utility payments, to score consumers with thin or nonexistent credit histories and make it easier for them to attract the attention of lenders.

According to Alibaba, Chinese consumers might also use their Sesame score for a different purpose: To attract a mate. The service is partnering with a Chinese online dating site on a test project that, if implemented, would allow users to check out potential partners’ credit scores. That way, they could “make sure they are not meeting someone who is dishonest or untrustworthy.”

In addition, the company envisions that Chinese consumers will use the score for other, less romantic purposes, such as finding a job, renting a car or an apartment and staying in a hotel without having to pay an advance deposit.

“Your credit will be like your calling card,” said data scientist Yu Wujie in an interview with the state news service Xinhua News Agency.

And unlike U.S. credit scores, you don’t have to have a Sesame score if you don’t want one. The data for the score is only collected if a consumer opts in.

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