Doing business ultimately comes down to a matter of trust. By respecting mutually agreed contracts, consumers are trusting that a business will deliver a service, and businesses are trusting that consumers will pay for that service.
The rapid development of the mobile Internet has dramatically shifted the way people build connections, access goods and services and establish trust.
The rise of the shared economy has also led to more convenient, inclusive and environmentally-friendly lifestyle options —people no longer need to own an apartment, a vehicle or a wardrobe of clothes just to experience them. Everything is for rent nowadays, and this can even be called a new industry, “the New Renting Economy”. Statistics show that the penetration rate of renting for consumer good is up to 22% in the United States, while it’s only 4% in China. However, borrowing houses, cars, bikes and fashion from strangers requires solutions for bridging the trust gap in record time.
The traditional way of tackling this issue is a cash deposit. When you don’t know or trust a counter-party in business, requiring a down payment makes perfect sense. But while deposits may seem like a minor inconvenience to some, many ordinary people and businesses find the routine deposits required to access goods and services in China to be an insurmountable barrier to everyday economic advancement. A one-month deposit to rent an apartment is almost as much as the monthly salary of a university graduate. For everyday commuters who travel long distances from subways and bus stations, but have little disposable income, the ability to rent bicycles deposit free is an invaluable service. Migrant workers would prefer to walk to work rather than pay a USD30 deposit.
Fortunately, technology can provide a solution. In 2015, Ant Financial launched Zhima Credit (also known by its English translation, Sesame Credit), a private alternative credit service, to help the hundreds of millions of Chinese consumers and businesses who have little or no formal credit history establish their trustworthiness in a commercial setting. This was a natural next step for Ant, as our payment business, Alipay, pioneered an escrow payment method in 2004 to allow distant buyers to pay sellers for goods without credit cards.
Zhima Credit is one of a number of global businesses – among them established credit scoring agencies like FICO as well as fintech start-ups – that are exploring the use of alternative data to assess trustworthiness. Why? Because there are many ordinary, trustworthy people who can be proven creditworthy by analysing data other than just loan repayment history. In fact, some advocates of alternative credit scoring, including Ant, have found these methods to be extremely reliable.
Once users opt-in to use Zhima Credit service, our algorithms draw on hundreds of metrics, including shopping transactions, bill payment and credit loan repayment history (available through Ant Financial platforms and affiliated Alibaba e-commerce platforms after user consent) to determine a “Zhima” score. The data we use is overwhelmingly commercial in nature, and not to be confused with or referred to as social credit. It is also only used to increase access to goods and services, and never applied to restrict access to public services.
Innovation like this is sorely needed in markets that lack the basic credit systems that consumers in the developed world take for granted. Waiving deposits may seem like a small place to start, but it translates into tangible improvements in everyday life in China.
Since 2015, we have enabled over 60 million users to rent bikes without a deposit. This year, Zhima Credit targets to exempt a total of 100 billion yuan in deposits for its users.
This is only the beginning. Building trust between strangers is not easy but opens up worlds of possibilities, and we can leverage technology to do the job, enabling millions of people to gain access to the fruits of the “New Renting Economy”. Zhima Credit Management TeamClick here for a FAQ about Zhima Credit.