This was the question FICO’s Dr. Andrew Jennings was challenged to answer as a guest speaker on a PBOC sponsored panel at The Third World Internet Conference in China.
While one would assume the answer is ‘yes’, the world of FinTechs, P2P lending and online financial services have suffered quite a few stops and starts in China. Investment bubbles driven by consumers seeking higher returns, embryonic regulation and a patchwork of lackluster risk management practices persist in a nation undergoing a massive program of urbanization.
Jennings spoke about the dual problems of reckless lending and the challenge of improving financial inclusion in China. He proposed that both can be solved with clever, analytically driven credit assessments that use new sources of data.
“When we look at the data in China, there is not a single data source that can provide us with a predictable credit score for everyone. So the Internet becomes a data opportunity for us,” explained Jennings. “It allows you to reach a large percentage of the population at low cost, you can gather data from sources like mobile phones and you can also examine the ‘exhaust’ or data trail from online interactions and all manner of financial transactions. All three of these aspects can facilitate the operation and underwriting of credit.”
Jennings said that even if the data sources change, the fundamentals of responsible and accurate measurement of creditworthiness remain the same. Understanding the consumer’s reliability, stability and attention to detail are key to effective credit assessment.
He was joined on the panel by numerous executives who are key players in the Chinese industry. These included senior leaders from the Tencent Group, the Postal Savings Bank of China, PayTM and the School of Finance at Tsinghua University.
Together they were just a fraction of the more than 1,600 guests, including state leaders, from over 110 countries and regions who converged on the picturesque town of Wuzhen in China for what many are calling the ‘Davos of Digital’.
“The Chinese are keenly interested in whether the Internet can revolutionize finance in the country,” said Jennings. “And as the world’s leading risk management and scoring company, we have been working closely with our Chinese clients and partners to develop solutions that will accomplish this. We want to make sure the Internet finance revolution is a success for both the established banks and the new players and have some very promising developments coming up in 2017.”
Beyond his experience on the panel, Jennings said the conference was a real eye-opener.
“The Chinese are making a serious investment in their online industry. The scale and scope of the conference demonstrates the economic, cultural and political benefits that the country is striving for from the development of the Internet in China,” said Jennings.
The Third World Internet Conference was opened by President Xi Jinping, who delivered the keynote speech. Fifteen of the latest digital inventions, ranging from Tesla's autonomous vehicle to a new generation of semi-conductors and Huawei's Kirin 960 chipset, were on show at the conference. China’s digerati were also in attendance, including Jack Ma from Alibaba, Robin Li from Baidu, Pony Ma from Tencent and Lei Jun from Xiaomi.