Chinese regulators are trying to get Jack Ma to do something the harassed billionaire has long resisted: sharing consumer credit databases collected by his financial technology giant.
Mr. Ma has little room to negotiate after the business empire he has built for decades has landed in the crosshairs of regulators and even President Xi Jinping, partly reflecting Beijing’s concern that the extravagant businessman s ‘has focused too much on his business fortunes rather than those of the state. goal of controlling financial risks.
The regulation considers that the unfair competitive advantage that the company has over small lenders or even large banks through strips of personal data taken advantage of by their lifestyle and lifestyle are fundamental to the repression against Ant Group Co., in which Mr. Ma is the controlling shareholder. Alipay application.
The app, used by more than a billion people, has voluminous data on consumers ’spending habits, their lending behaviors, and their backgrounds on bill and loan payments.
Equipped with this information, Ant has given loans to half a billion people and has managed to get about 100 commercial banks to provide most of the financing. In these agreements, banks assume most of the risk of default by borrowers, while Ant takes profits as an intermediary.
Ant Group employees in Hangzhou, China, in October.
Photo:
aly song / Reuters
Now, the authorities are trying to overthrow this business model, which has been lucrative for the company, but which presents possible dangers for the country’s financial system.
Authorities should not only regulate Ant’s lending business as a bank, which would cause it to provide more equity when making loans; they also plan to break what they consider the company’s monopoly on data, according to government officials and advisers with knowledge of the regulatory issue.
Ant declined to comment.
A plan that is being proposed would require Ant to feed his data into a national credit reporting system managed by the central bank, the People’s Bank of China, according to people familiar with the matter. Another option would be for Ant to share this information with a credit rating company that is effectively controlled by the central bank.
Although Ant is a shareholder in the credit rating company, along with seven other Chinese companies based on big data, it has not released its data, according to people.
“The way data monopolies are regulated is at the core of the problem here,” said an adviser to the antitrust committee of the State Council of China, the highest governing body.
In the United States, lawmakers have also stepped up efforts to crack down on Big Tech, arguing that companies like Facebook Inc.
and Google have used large amounts of data to eliminate rivals. All the tech giants have denied all the illegal acts.
Some analysts in China’s financial technology industry agree that it is in the public interest for companies like Ant to share consumer credit data. It is unclear, however, whether regulators would require access to its entire database, including proprietary information that Ant uses to analyze the creditworthiness of its customers.
Days before it was planned for Chinese fintech giant Ant Group to go public on what would have been the world’s largest listing, regulators suspended plans. Quentin Webb, of WSJ, explains the sudden turn of events and what it means to suspend the IPO for the future of Ant. Photo: Aly Song / Reuters (originally published on November 5, 2020)
“Making credit histories and scores more public is good,” said Martin Chorzempa, a researcher at the Peterson Institute for International Economics who is writing a book on the fintech technology sector in China.“It can help make loans more competitive and prevent overcrowding.”
For years, China’s financial regulators, led by the central bank, have been striving to build a credit scoring system similar to US FICO scores, created by Fair Isaac Corp.
, as a way to make it easier for lenders across China to assess credit risks and expand access to finance for businesses and individuals. The effort is part of a broader “digital governance” initiative aimed at leveraging data and technology to assert greater social and economic control.
Mr Ma, perhaps the Chinese businessman most identified with innovation in recent decades, has helped the government in a number of ways over the years. Alibaba Group Holding Ltd., the e-commerce giant it co-founded in 1999, has used its data sources to help authorities prosecute criminal suspects and silence dissent. Ant’s Alipay payment app includes contact tracking features to help the government contain the coronavirus pandemic.
But over the past two years, Mr. Ma has resisted regulatory attempts to make Ant-owned personal credit data more available, according to government officials and advisers familiar with the matter.
In 2015, Ant started its own credit scoring system, called Zhima Credit, which assigned ratings to many people and small businesses that did not have credit histories established elsewhere.
Three years later, the People’s Bank of China launched a personal credit reporting company called Baihang Credit, and invited Mr. Ma’s ant, Tencent Holdings Ltd.
, owner of the popular messaging app WeChat and its associated mobile payment network, and six other companies that will be minority shareholders in Baihang Credit. The controlling owner is the National Internet Finance Association overseen by the central bank. The idea was to get Ant and others to share their credit data with the customer, which could be accessed by financial institutions across the country.
However, the plan failed. Ant declined to provide what it considers its proprietary data to maintain its competitiveness, officials and advisers say. Zhima Credit’s ambitions, meanwhile, were curtailed and the Ant unit is now essentially a loyalty program, offering people with high credit scores such as deposit waivers on mobile, bike and car charger rentals. .
Mr Ma himself has been embroiled in a regulatory storm in recent months. A public speech he delivered in late October, in which he attacked President Xi’s signature campaign to combat financial risks, as well as against financial regulators, infuriated the leadership and propelled Mr. Xi to personally call off a long-awaited sale of shares by Ant, according to Chinese officials with knowledge of the matter, and order regulators to investigate the risks posed by his business.
Since then, regulators have used Mr. Ma’s reduction and his empire as part of a larger effort to strengthen oversight of the country’s increasingly influential technology sphere.
At a private meeting with regulators in early November, Mr Ma himself also offered that the government “take whatever part Ant has, as long as the country needs it,” according to people who are aware of it. In late December, the central bank set a roadmap for Ant to restructure its business, requiring, among other things, that the company have a full license to operate its personal credit business.
In a statement issued by the People’s Bank of China, Deputy Governor Pan Gongsheng also widely criticized the company for its “challenge to regulatory demands.”
Mr. Ma has not appeared publicly since his October speech. Ant over the past few weeks has reduced some parts of its operations, lowering credit limits for some individual borrowers and eliminating online deposit products that financial regulators have frowned upon.
—Xie Yu contributed to this article.
Write to Lingling Wei at [email protected]
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