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Big Data and China’s Social Credit Score

A court in a Northern China province has developed a mobile app designed to enforce court rulings and create a socially credible environment. The app, which can be accessed via WeChat, China’s most popular instant messaging platform, is designed to alert users when they are within a 500-meter radius of someone in debt. Users will get personal information about the debtors, including their exact location, names, national ID numbers, and why they have a low score. It’s the latest innovation to become integrated into China’s social credit system.

What is a social credit system?

China’s social credit system, which will be enforced in 2020, aims to standardize the social reputation of citizens and businesses. It will rank citizens by attaching a score to various aspects of their social life – ranging from paying court fees to drinking alcohol to failing to pay bills. Although there are proposed consequences for low scorers, including travel bans and loan declines, 80% of citizens recently surveyed by the Washington Post support it.

While the app seems like it could be a plotline from a “Black Mirror” episode, with its emphasis on reputation scoring and location-based activation, there are reasons it makes sense for the rather remote northern province. With many people in China still not having formal access to traditional banks, being able to alternatively assess their trustworthiness and risk could provide them the ability to access loans, rent houses, and even send their children to school. Additionally, to increase their scores, Chinese citizens are displaying improved behavior.

China isn’t the first country to attempt to gain a robust understanding of its consumers through alternative data sources. While U.S. financial institutions have experimented with using social media as a factor in determining a borrower’s risk, Philippines-based Lenddo, a world leader in scoring and identity verification technology, is doing that and more. The company looks at social media, email, and mobile headset activity to determine repayment ability. Moreover, Discovery Bank in South Africa believes there’s a correlation between fiscal responsibility and physical health. The South African bank plans to begin tracking the habits of its 4.4 million customers and offering better deals to those who are living a healthier lifestyle. For example, consumers can earn points for visiting the gym, getting a flu shot, or buying healthy groceries. The more points a consumer collects the better deals and savings they’ll receive.

The willingness to share data is not a characteristic unique to South African or Chinese citizens. A recent Accenture study of 47,000 banking and insurance customers showed that consumers are willing to share personal data in exchange for better customer assistance and discounts on products and services.

The full extent of the impact on social credit to Chinese citizens is impossible to calculate, simply because the system doesn’t fully exist yet. However, it does serve as an example of the many ways that credit scoring and the use of customer-permissioned data are evolving. Long gone are the days of mailing checks, ordering from a catalog, or even needing to carry cash. What’s next?