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[HONG KONG] Talkative people pay back loans. The very talkative default. Too taciturn is no good either. Also, don't take out a loan at 4 am.
Those are lessons from online lenders in China that are tracking people's behaviour - via apps on their mobile phones - and taking it into account when deciding what their credit ratings should be. Chinese consumers don't mind handing over personal details that would spark outrage in the West, in exchange for lower interest rates.
The Chinese willingness to share is key to China's plan to create the largest repository of online data on its citizens and their habits in the world. More than 80 per cent of what's collected is in the hands of the government, which will make it largely available for private sector use, Chinese premier Li Keqiang recently told an audience in China that included Dell Inc chief executive officer Michael Dell.
WeLab Ltd, a Hong Kong-based online lender that makes loans in China, looks at what apps people have downloaded, where they go using the phone's GPS tracker, their social networks and their school records. It offers discounted interest rates for each extra piece of personal information that helps profile customers for credit ratings.
In Hong Kong, for example, giving WeLab access to a Facebook account gets a 5 per cent discount on the cost of a loan, and access to LinkedIn gets you 10 per cent off, on loans with interest rates that otherwise reach as high as 20 per cent.
"Chinese people have no issue handing over their personal data, giving you their credit card number, giving you their bank account," said GGV Capital's Shanghai-based managing partner Jenny Lee, whose Silicon Valley venture capital firm has invested in data-hungry tech giants such as Alibaba Group Holding Ltd.
"Look at the whole internet finance sector, people are giving you their bank statement so you can do profiling."
Some are perhaps over-sharing. University students desperate for cash have been sending nude photos of themselves as collateral to several online lending platforms, according to the official People's Daily. Typically they get loans of 15,000 yuan (S$3,062) - more if they're doctoral students or enrolled at a famous university, the report said, and at least one loan had a weekly interest rate of 30 per cent. Delinquent borrowers face the threat of their naked selfies being sent to family if they don't pay.
Evaluating people using their phones is just the application of technology to what's always gone on in the past, and the data shared is now voluntary, according to Simon Loong, WeLab's co-founder and CEO.
"Before when you wanted to get a loan, you'd go to the bank, and the banker could look at how you combed your hair, what shoes you wore," said Mr Loong, who used to work in the personal loan and credit card businesses of Citigroup Inc and Standard Chartered Plc.
"The behaviour of your phone shows your personality."
Visual profiling was inconsistent and hard to roll out widely, he said. Credit bureaus fill the gap in developed economies but still don't cover everyone in developing economies like China.
WeLab's technology has helped fill in the blanks, drawing investor interest including from Asia's third-richest man Li Ka-shing, ING Groep NV, Sequoia Capital, Malaysia's Khazanah Nasional Bhd and Chinese state fund Guangdong Technology Financial Group. In January, the company raised US$160 million.
Other Chinese data miners have drawn global investors, too. Shanghai-based China Rapid Finance uses data collected from internet companies including Tencent Holdings Ltd to pre-approve millions of potential borrowers based on the frequency of their instant messaging, the number of online friends, how long they've had their phones and their mobile shopping and gaming habits.
Private equity firm Broadline Capital of New York has led a funding round. China Rapid Finance is planning an initial public offering, the Wall Street Journal reported earlier.
Probing the digital trail certainly isn't confined to China. Data mining has become commonplace among US retailers. Big-data analytics, already a US$16 billion industry in the US, is forecast to be the fastest-growing software segment by revenue, reaching US$23 billion by 2019, according to International Data Group's IDC. Lenders in the US faced regulatory hurdles in factoring in social media to determine creditworthiness, and Facebook Inc made it tougher for outsiders to monitor posts, the Wall Street Journal reported.
It's the developing world where the business is biggest, including in Latin America and Africa. Kreditech, based in Hamburg, Germany, is among the largest of the new breed of consumer lending data collectors in emerging markets, with more than 306 million euros (S$462 million) in backing from the likes of Peter Thiel, New York-based private equity firm JC Flowers & Co, and venture capital firm Amadeus Capital Partners.
First Access, a New York-based startup, mines data stored on Tanzanian and Kenyan borrowers' mobile phones to recommend a loan amount to banks and microfinance lenders within 90 seconds. Others include EFL Global, originally developed at Harvard University's Center for International Development, and Singapore-based Lenddo.
Yet the breadth and depth of the data being collected in China is far greater because of fewer cultural and legal barriers to sharing personal information. China has set a goal of becoming the global leader in mining digital data, with a data pool bigger and deeper than any in the world. Its key advantages include the world's largest population of 1.3 billion people combined with a culture more accustomed to surveillance and handing over personal data.
Since the Mao era, China's government has kept a secret file, called a dang'an, on almost everyone. A dang'an contains school reports, health records, work permits, personality assessments, and other information that might be considered confidential and private in other countries. It can determine whether a citizen is eligible for promotion or a coveted urban residency permit.
"There's a whole consumer ability to accept uncertainty, lack of privacy, being listened to," said GGV Capital's Lee, citing the collective ideology of Communism as a possible reason.
China's government intends to allow its homegrown tech companies to use the data, with unspecific pledges to protect privacy.
"Except for those concerning national security, commercial secrets and privacy, other resources and data shall be made accessible to the public," Premier Li said as part of his comments that 80 per cent of China's data is in the hands of the government, made last month at the Big Data Expo in Guiyang, an undeveloped province that China wants to refashion into a global big-data hub.
More than 20 per cent of global data processing and storage will take place inside China's so-called Great Firewall by 2020, said Lin Nianxi, deputy chairman of the National Development and Reform Commission.
"China will then become the world's biggest data resource country and a global data centre," he said.
It's not just the online lenders that are hoping to benefit from China's data ambitions. Baidu Inc, which runs China's biggest online search and mapping service, is investing in auto-related businesses including online car market Bitauto Holdings Ltd and China Pacific Property Insurance Co.
It plans to combine search results with other data it collects to sell products like customised car insurance, a market which it expects to be worth nearly US$200 billion by 2021.
Alibaba Group's filmmaking unit has plans to leverage all the digital data it's collected to help it make and market movies, according to the South China Morning Post, which is owned by the e-commerce company.
Zhang Qiang, CEO of Alibaba Pictures Group Ltd, said it would harness data to fund targeted movies by small and medium-sized film companies, the report said.
Ride-hailing app Didi Chuxing, which recently scored a US$1 billion investment from Apple Inc, has promised to integrate its rider data into government transport networks. One of its biggest shareholders and transaction handlers, Tencent, has pledged to share its massive datasets.
And a Chinese defense contractor, China Electronics Technology Group, is using the hobbies and behaviour of citizens to predict whether they're likely to become criminals.
Not every lender is as invasive, according to Zhou Jing, CEO of Dumiao, which provides merchants a credit-card like service by offering customers instant loans when they buy products or services. Dumiao is part of Pintec Group, which also owns online lender Jimubox.
"We find if you're very intrusive, you can lose a lot of customers," said Ms Zhou, who doesn't look directly at mobile phone data or social media. Instead, the company relies on 100 variables, using information from China's official credit bureau cross-referenced with data from other providers such as Alibaba affiliate Sesame Credit, which collects data from more than 300 million users.
The company's default rates are similar to banks, she said. Talk about mining people's social media profiles "is a bit of a hype," said Ms Zhou, who previously was Standard Chartered's head of credit for small business lending in China.
"People use the expression a lot, but when it comes down to proper, sensible lending, the traditional understanding still holds."
WeLab's Mr Loong said his app has already learned to give credit ratings based on factors such as how much people talk on the phone, and at what time of day.
But GGV's Ms Lee warns the flip side of having Big Brother watching is that consumers expect him to step in when things go awry. Ms Lee said a Didi driver she questioned about the safety of online digital wallets brushed aside her concerns: "He said, 'Don't worry, if something happens the government will protect me.'"