WeChat is a Chinese-based messaging and social media app with over 1 billion monthly active users. Users can also link their bank accounts and can use the app to pay bills, make online purchases, buy in-store, or transfer money to other users. This digital wallet is used by more than two-thirds of its users.
Now, WeChat is also determining credit scores for Chinese consumers. Those with higher scores get special perks for things like waived banking fees, elimination of deposits on rentals, and hotel bookings. WeChat Pay Points analyzes spending behavior and social media connections to formulate a credit score for even those without established financial history. The credit scores of your friends and connections may also play a role.
For merchants, WeChat Pay Points helps reduce bad debts by analyzing creditworthiness, past payment history, and collections.
eCommerce giant Alibaba was the first in the credit score marketplace. Using its financial arm, Ant Financial, it launched its own credit scoring system in 2015 called Sesame Credit using shopping patterns and payment history from AliPay and shopping on Alibaba’s online marketplace. The system rates users on a scale of 350 to 950.
The Chinese government has also set up a centralized credit scoring system as well that also tracks criminal records and judgments. Authorities have used the results to temporarily restrict citizens from using trains and planes based on their histories.
The Chinese government gave its consent to private companies to develop their own credit scoring system but is keeping a tight rein. It forced the shutdown of some competitors over concerns about potential abuse of confidential information.