By: Shazeda Ahmed
Imagine if receiving a credit score were as easy as using some of the most popular mobile apps—Uber, Venmo, Amazon, Facebook Messenger. In China, fintech firm Ant Financial (a spin-off of tech giant Alibaba) has created a mobile payments app, Alipay, whose credit rating feature has issued over 200 million “social credit” scores using exactly these types of data inputs. Think of Alipay as a web browser attached to a mobile wallet: within the app, anything users can pay for digitally, from medical appointments to tuition, or car rentals to airfare, is factored into a Sesame Credit score. Sesame Credit takes traditional financial information such as bill repayment into account, alongside behavioral data (e.g., donations to charity), social network information (who one’s friends are within the app and how well they score), and demographics including education level, gender, and occupation. One common use of the scores is to qualify for consumer credit through the Alipay feature Huabei (literally “just spend”). Additionally, high-scoring users can share their scores with third parties for deposit waivers and expedited services, with examples including bicycle and car rentals, hotels, dating websites, and even visa offices at certain foreign consulates.
At WIRED, journalist Mara Hvistendahl has written a fantastic article about her experience signing up for Sesame Credit while living in Beijing. Some consumer protection concerns she raises include opacity about which transactions might raise or lower a score, and how data previously collected for a purpose unrelated to credit evaluation might later be drawn into one’s rating. An example is the list of students who were reported for cheating on the national college entrance exam (similar to the SAT), which Ant Financial has discussed using as an additional data source for downgrading scores. The company already draws from government-issued blacklists of debtors to decrement users’ Sesame Credit scores as an incentive to repay their debts. Ant Financial has even boasted that in some instances after debt repayment, there are users whose low scores plateau and never recover.
Another concern that Hvistendahl raises, and that an upcoming research project of mine will address, is the question of what data third parties exchange with Sesame Credit. Several hundred companies have entered into such agreements. As Hvistendahl notes of one car rental firm, if a user “crashes one of the rental company’s cars and refuses to pay up, that detail is fed back into his or her credit score.” Given that the number of Sesame Credit’s third party partners is on the rise—most recently, eight Chinese cities have announced that landlords will be allowed to use the scores to evaluate potential tenants—it is critical to establish security standards for these data exchanges. What other data are third party partners sharing with Sesame Credit, and how aware are users that this is occurring?
While in Beijing on a Digital Credit Observatory pilot study grant this summer, I spoke to Sesame Credit users to get a sense of their consumer protection concerns. While a few people raised issues including data security and privacy, the most interesting complaint I heard from users was that they disliked the way the app tries to mimic social media. Whereas the app wants more data about people’s social networks to assess correlations, users expressed annoyance that the app encouraged them to add complete strangers (e.g., street food vendors) as “friends” in the app. Even people who like Alipay and Sesame Credit told me that they prefer to keep their social interactions removed from the app’s assessments. Yet they might not be able to maintain this separation for much longer, as China’s dominant social media and messaging company, Tencent (owner of WeChat), is currently experimenting with its own social credit product.
While the system is relatively under-regulated, it is time for the regulators, tech firms, researchers, and users to discuss much-needed consumer protections such as limits on both the types of data that can be used for social credit scoring, and applications of these scores. Credit repair mechanisms and more detailed user-facing descriptions of the types of data that factor into the score may be the first steps toward demystifying the process.
Shazeda Ahmed is pursuing her PhD at UC Berkeley’s School of Information. During Summer 2017, she traveled to Beijing to conduct qualitative interviews with users of Sesame Credit to understand consumer protection concerns. Her study “Consumer Protection Oversights in the Chinese Social Credit System” received funding through a DCO travel pilot grant in Spring 2017.
To learn more about WeChat Pay and Alipay's plans for advancing rural financial inclusion, check out this CGAP brief "China's Alipay and WeChat Pay: Reaching Rural Users".