China Tightens Scrutiny Of Consumer Lending By Tech Giants

Ant Group, Tencent and JD.com are facing a crackdown by Beijing over concerns of over-lending to consumers through their platforms, a major cash cow for the Chinese tech giants.

The three firms, along with others, will now have to share consumer lending data more widely with Chinese regulators and major banks in the country, Reuters reports, citing two people familiar with the matter.

The move follows the cancellation by Chinese authorities in November of Ant’s highly anticipated $37 billion IPO. Since then, Beijing has also launched an antitrust investigation into Alibaba, Ant’s former corporate parent, while ordering the FinTech to make major changes to its consumer finance and lending businesses, the news service reports.

Under the new plan, the People’s Bank of China, or PBOC, will order online lending platforms to feed their closely guarded consumer data into nationwide credit agencies.

And that data trove is likely to be vast: Ant has financial records, through its Alipay app, of more than one billion consumers and 80 million merchants, according to Reuters, citing analysts and the company’s prospectus.

The central bank, in turn, will share the data with banks and lenders, with an eye toward clamping down on risky and even potentially fraudulent consumer lending and properly evaluating risks.

Both Tencent and Ant declined to comment to Reuters on the story, while JD.com and the PBOC “did not immediately respond to requests for comment.”

Beijing’s push to tighten scrutiny of consumer lending is also aimed at smaller banks, as authorities are concerned they have grown overly dependent on online lending platforms for loans and don’t have the ability or heft to monitor risk.

“Smaller banks are generally in a weaker position when they partner with FinTech giants like Ant. They have heavily relied on Ant’s data to underwrite loans and manage risks,” one senior regulator told Reuters.

“When defaults happen, they have to shoulder most of the losses,” said the regulator, who declined to be named because of the sensitivity of the matter. “It’s crucial for lenders to have better access to more comprehensive and detailed credit data on borrowers.”