In 2015 China’s Central Bank contracted eight companies, including affiliates of Tencent, Ping An and Alibaba, to help build a credit system that could rival what other developed economies use. The experiment up until today has not fared well as lenders and e-commerce firms continue to use their own proprietary systems to determine risk of the borrower.
One of the main drivers behind the failure is companies were reluctant to share the data they collected. Also, conflicts of interest arose as users could be rewarded by using certain companies to drive their score up.
The People’s Bank of China officially ended the original consortium credit idea earlier this year and created a new company, Baihang Credit Scoring. The new company is structured as a joint venture by using the original eight companies and awarding them each with an eight percent ownership stake. The remaining 36 percent is held by state-owned National Internet Finance Association.