David Tuesta

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Financial Inclusion Data: Taking Stock

A released State Council planning document indicates that credit scores will be determined by more than just financial behaviors. While the creation of a country-wide credit reporting system potentially presents big benefits to lenders and borrowers, it's essential that such a system doesn't unfairly discriminate or breach citizens' privacy.

The government of China is launching a mandatory credit scoring system in 2020 and since the publishing of a <a href="https://www.aclu.org/blog/free-future/chinas-nightmarish-citizen-scores-are-warning-americans">piece on the system</a> by the American Civil Liberties Union (ACLU) last week, it's become a topic of passionate discussion. It remains to be seen how the system will work.  

Below are the opening excerpts from the ACLU post and from a <a href="https://www.techinasia.com/china-citizen-scores-credit-system-orwellian/">Tech in Asia post</a>, which weighs in on the ACLU's points and offers additional food for thought.

"China’s Nightmarish Citizen Scores Are a Warning For Americans"

&gt; By Jay Stanley, Senior Policy Analyst, ACLU Speech, Privacy &amp; Technology Project

China is launching a comprehensive “credit score” system, and the more I learn about it, the more nightmarish it seems. China appears to be leveraging all the tools of the information age—electronic purchasing data, social networks, algorithmic sorting—to construct the ultimate tool of social control. It is, as one commentator <a href="https://twitter.com/interfluidity/status/650803807262130177">put it</a>, “authoritarianism, gamified.” Read <a href="https://www.privateinternetaccess.com/blog/2015/10/in-china-your-credit-score-is-now-affected-by-your-political-opinions-and-your-friends-political-opinions/">this piece</a> for the full flavor—it will make your head spin. If that and the <a href="http://www.chinadailyasia.com/business/2015-06/09/content_15274221.html">little</a> <a href="http://www.fastcoexist.com/3050606/china-is-building-the-mother-of-all-reputation-systems-to-monitor-citizen-behavior">other</a> <a href="http://www.volkskrant.nl/buitenland/china-rates-its-own-citizens-including-online-behaviour~a3979668/">reporting</a> I’ve seen is accurate, the basics are this:

<ul>
 	<li>Everybody is measured by a score between 350 and 950, which is linked to their national identity card. While currently supposedly voluntary, the government has announced that it will be mandatory by 2020.</li>
 	<li>The system is run by two companies, Alibaba and Tencent, which run all the social networks in China and therefore have access to a vast amount of data about people’s social ties and activities and what they say.</li>
 	<li>In addition to measuring your ability to pay, as in the United States, the scores serve as a measure of political compliance. Among the things that will hurt a citizen’s score are posting political opinions without prior permission, or posting information that the regime does not like, such as about the Tienanmen Square massacre that the government carried out to hold onto power, or the Shanghai stock market collapse.</li>
 	<li>It will hurt your score not only if you do these things, but if any of your friends do them. Imagine the social pressure against disobedience or dissent that this will create.</li>
 	<li>Anybody can check anyone else’s score online. Among other things, this lets people find out which of their friends may be hurting their scores.</li>
 	<li>Also used to calculate scores is information about hobbies, lifestyle, and shopping. Buying certain goods will improve your score, while others (such as video games) will lower it.</li>
 	<li>Those with higher scores are rewarded with concrete benefits. Those who reach 700, for example, get easy access to a Singapore travel permit, while those who hit 750 get an even more valued visa.</li>
 	<li>Sadly, many Chinese appear to be embracing the score as a measure of social worth, with almost 100,000 people bragging about their scores on the Chinese equivalent of Twitter.</li>
</ul>
A few years ago I wrote a <a href="https://www.aclu.org/blog/would-it-be-easier-fight-surveillance-if-soviets-were-still-around">piece</a> about how the fall of the Soviet Union, for all its benefits, has made it harder to defend privacy in the United States. During the Cold War, I argued, we defined ourselves in opposition to an enemy that exemplified and embodied in very real form the nightmarish potential of widespread surveillance and control. This made it easy to point to surveillance and shout, “un-American!”

To read the rest of this post, <a href="https://www.aclu.org/blog/free-future/chinas-nightmarish-citizen-scores-are-warning-americans">click here</a>.

"China’s ‘citizen scores’ credit system isn’t as Orwellian as the ACLU thinks…yet"

&gt; By C. Custer

Recently, you may have come across <a href="https://www.aclu.org/blog/free-future/chinas-nightmarish-citizen-scores-are-warning-americans">this ACLU piece</a> – or any of the dozens of sites reblogging it – about China’s new citizen score system. Mandatory credit scores for everyone that take into account everything from your video game purchases (that’ll drop your score) to your friends’ political activities? Rewards like travel visas for those with good scores? It sounds like a nightmare.

Thankfully, it’s not quite as bad as all that. The ACLU seems to have been confused about a few things, but here’s the key one: Alibaba’s Sesame Credit scoring system, Tencent’s credit scoring system, and the mandatory government one (which isn’t mandatory until 2020) are not the same things. They are three different things that many articles in the Western press are treating as if they were the same.

Alibaba and Tencent’s credit systems: two different non-government products

Sesame Credit does offer some of the features outlined in the ACLU article. It doesn’t hand out Singapore visas, obviously – I’m not sure how that would even be possible – but it was offering promotions for people with high credit scores, including access to a high-speed VIP check-in at Beijing’s Capital International Airport. China’s government has not endorsed this, though. In fact, <a href="http://english.caixin.com/2015-09-28/100859064.html">according to Caixin</a>, China’s central bank is annoyed by the promotional tactics and has reportedly ordered Sesame Credit to stop offering the airport promotional benefit.

The online score-sharing and bragging alluded to by the ACLU also seems to be coming primarily from Sesame Credit. Some critics have accused the scoring system of essentially being a marketing gimmick designed to promote use of Alibaba’s payment service Alipay (since an increased number of transactions will raise your score).

Many of the other details from the ACLU’s article seem to be based on Tencent’s credit score system, which does <a href="http://www.chinadaily.com.cn/business/tech/2015-08/08/content_21535587.htm">mine data from users’ social networks</a> in order to determine their credit. I haven’t been able to find any direct statement that Tencent factors in users’ political post history – or that of their friends – in determining a credit score.

The difference between the two systems makes sense when you think about the companies’ backgrounds. Ecommerce-focused Alibaba’s credit system is based heavily in users’ purchase and payment history. Social giant Tencent’s credit system is based on users’ social networks. Each company is leveraging the data to which it has access. China doesn’t have a national, comprehensive, and widely-used credit system like those in the West, so private lenders like Alibaba and Tencent have created these systems to better inform their lending decisions.

To read the rest of this post, <a href="https://www.techinasia.com/china-citizen-scores-credit-system-orwellian/">click here</a>.

Have you read?

<a href="http://cfi-blog.org/2015/10/13/the-data-story-in-the-fi2020-progress-report-on-credit-reporting/">The Data Story in the FI2020 Progress Report on Credit Reporting</a>

<a href="http://cfi-blog.org/2015/04/03/new-research-highlights-increasing-use-of-alternative-data-in-credit-reporting/" target="_blank" rel="noopener">New Research Highlights Increasing Use of Alternative Data in Credit Reporting</a>

<a href="http://cfi-blog.org/2015/07/16/more-credit-information-sharing-in-emerging-markets-a-call-to-action/">More Credit Information Sharing in Emerging Markets: A Call to Action!</a>

&nbsp;

David Tuesta

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