While the 1979 movie involved problems with nuclear power safety, the modern-day “China Syndrome” could refer to problems with China’s consumer credit system. Unlike countries with more capitalistic economies, the Chinese system is poorly developed, lacking an efficient and effective means for lenders to evaluate its citizens’ consumer data to assess credit risk and thus make loans. That shortcoming might be on the verge of changing for the world’s second largest economy.
ZestFinance, a supplier of underwriting tools to American payday lenders, is forming a joint venture with one of China’s largest online direct sales company, JD.com, to facilitate development of a Chinese consumer credit risk evaluation system. JD.com, which has a database of more than 100 million active customers, will be making a minority investment in ZestFinance to help fund the arrangement, to be called JD-ZestFinance Gaia. The goal is for lenders to be able to share data on Chinese consumers, who typically have little or no credit history. Those without good credit will be able to build good credit, and those who already have good credit will be able to get better loan terms. ZestFinance analyzes vast data mined from consumers’ online shopping habits rather than just the few variables usually considered by most consumer credit underwriters.
ZestFinance is a Los Angeles-based company founded six years ago by a former Google executive. JD.com is a competitor of Alibaba, which has also offered consumer microloans in China as has Tencent.