Our Eclipsing Credit Scoring System

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Cover Photo of SCC Corner at Smart Vision Issue 4

This year, China took a bold step towards a more market-led economy. The People’s Bank of China (PBOC) announced on 4th January that it has officially accepted Baihang Credit Scoring’s license application for the domestic personal credit scoring (as known as Xinlian).

Baihang Credit Scoring, led by National Internet Finance Association of China, is going to be the first private institute to provide personal credit information services.

In the past, under the centrally planned economy, the PBOC’s Credit Reference Centre was the only organisation to collate credit data from and for banks and financial institutions to conduct risk assessments.

In the past 10 years, however, China’s financial market reform on the legal infrastructure and financial regulatory framework has contributed to its expansion. Moreover, the thriving customer market is equally important to the emergence of new individual financial products.

Online payment service providers, such as Alibaba and Tencent, have snatched significant portions of the retail payment market from their conventional banking counterparts. According to the statistics from iResearch, a mainland research company, the percentage of Internet finance in the third-party mobile payment market in Q2 2017 is 41%, while personal finance is 27%, with online shopping being less than 18%. It is evident that third-party online payment platforms like Alipay and WeChat Pay are more than payment options for P2P small-value transaction. These e-Commerce solution providers will soon be dominating business models for various types of financial services for the citizens.

Locally, the Hong Kong Association of Banks (HKAB), the DTC Association (DTCA) and the Commercial Credit Reference Agency collate credit information from small and medium-sized enterprises (SMEs), such as business registration number, total credit limit, mortgage loans, indebtedness and credit history. As to personal loan, TransUnion, co-founded by financial institutions, is an information sharing database collating credit information, which was further commercialised after acquisition by TransUnion International in 1999. As the only consumer credit reference agency in Hong Kong, TransUnion Limited has currently collected both positive and negative credit information on about five million customers, ranging from personal profile to records of secured and unsecured lines of credit, as well as credit cards record. Many of which are provided by hundreds of banks and microcredit firms.

Openness, adaptability and creativity were the driving forces behind the internationalisation of Hong Kong’s economy over the past century. Low transaction costs, less stringent Know-Your-Customer (KYC) regulations, free capital flows, comprehensive judicial system, well-integrated information infrastructure and political stability have reinforced Hong Kong’s position as the leading financial centre in the Asia Pacific.

As the application of big data analysis and artificial intelligence are expected to dominate the FinTech landscape in the future, global financial institutions discovered that the extensive analysis on spending habits and individual characteristics can provide more reliable data in calculating credit scores than traditional approach based on income and repayment records. Meanwhile, people are asking whether Hong Kong is ready to embrace the dawn of Internet revolution in terms of legislation, regulatory framework, workforce re-skilling, market orientation and privacy protection? Chance favours only those with the prepared mind. We need to re-think on how to catch up with the global trend of FinTech revolution.

Our Government can play an important role in transforming our credit scoring system. Only by leaving the beaten path could we avoid losing ground to our competitors. Hong Kong, what is our next move?

Article was published at HKEJ in Chinese on 22 Jan 2018 and republished in English at Smart Vision in May 2018

以「還俗IT人」自居。香港金融科技革命「吹哨人」。主要工作除了擔任金融科技初創企業顧問外,也是香港城市大學、香港理工大學、香港大學、嶺南大學等知名商學院之特約教授及客席講師,積極透過教育推動本地及大灣區金融科技及智慧城市發展。 放下幾十年編寫電腦程式的鍵盤後近年重新以此寫作。以「但憑愚公志,復我獅山茂」為工作目標。

以「還俗IT人」自居。香港金融科技革命「吹哨人」。主要工作除了擔任金融科技初創企業顧問外,也是香港城市大學、香港理工大學、香港大學、嶺南大學等知名商學院之特約教授及客席講師,積極透過教育推動本地及大灣區金融科技及智慧城市發展。 放下幾十年編寫電腦程式的鍵盤後近年重新以此寫作。以「但憑愚公志,復我獅山茂」為工作目標。

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