At least one Chinese company has paired social media with lending.
Tencent evaluated 50 million Chinese consumers using what might be thought of as unconventional lending or credit scoring criteria: data gleaned from gaming and social networking use.
As noted by the Financial Times on Sunday (Aug. 30), the Chinese Internet company gathered data across its hundreds of millions of users and, using China Rapid Finance as a processor, sorted that data using an algorithm that measured various Tencent offerings, including WeChat, a social application that boasts 600 million users, and games that are played on smartphones.
According to FT, that data can help score the roughly 80 percent of the Chinese population that has no credit rating and also has no access to credit.
China Rapid Finance said it has used the data to synthesize 3 million peer-to-peer loans through the partnership’s six months in existence. The companies, however, declined to state how much the loans were worth, in total or on average.
Zane Wang, founder and CEO of China Rapid Finance, stated that “the more someone uses social networking services, [the more it] shows that people are concerned for their reputation, concerned for their integrity.” Internet purchasing history, including activities such as buying points in an online game, was also considered in determining creditworthiness.
China Rapid Finance traces its history to 2001, and its loans carry a 21 percent interest rate, FT reported, which is about 3 percent higher than other credit instruments such as credit cards.
The company recently closed a Series C financing round, which, at $35 million, brought its valuation to $1 billion and also brought speculation that the company might be leaning toward an initial public offering.