Social credit score 社(shè)会(huì)信(xìn)用(yòng)分(fēn) means rating how trustworthy you are based on your spending habits, social connections and your online behavior on social media. Traditional credit scores are what lending institutions use to judge how likely you will pay back the money before they lend you. Traditional credit score use information such as whether and how long you have a job, how much money you owe relative to how much you earn, and so on. Social credit is being used in similar ways with a different set of data. Tencent Credit 腾讯信用分 and Sesame Credit 芝麻信用分 are the prime examples.
For example, social credit score can be like a test score number that ranges between 300 and 850 and made up of five dimensions/categories 5 个维度:
- social connections
- consumption behavior
WSJ reported in 2016 on social credit in China with an article title “China’s New Tool for Social Control: A Credit Rating for Everything“. The words “social control” and “Big Brother” have bad connotations. However, politics aside, we do appreciate people who have good social credit.
What can social credit scores be used for? Traditional credit scores are used by banks or other lenders to approve loans, used by employers to screen candidates, and some other kind of approvals. Likewise, social credit scores can be used for similar purposes. Alibaba’s affiliate Ant Financial opened a strictly online bank called MyBank that serves small businesses and individuals. This online bank takes deposits the same way as Synchrony or AlyBank in the US do. But it also gives out unsecured loans (without any collateral) up to $850,000. That is a lot of money to lend without collateral (by the way, mortgages are secured loans collateralized by the house). Underlying the decision to lend or not to lend is social credit score, calculated based on huge amount of online transaction data.
Back to the US, which companies may have data that can generate a full or partial social credit score? I think Airbnb, Amazon, Facebook, Lyft, UBER and etc. all have huge amount of data that can be used for credit scoring. Due to the high regulatory cost (banks are highly regulated), it is not likely that any of them would want to become a bank. But they can take some of the businesses that banks always have been doing. For example, Amazon has Amazon Cash and variations of it in various countries such as the U.K. Also, UBER has recently offered UBER cash. These are banking businesses: they allow people to shop or ride without a credit or debit card as long as you load your account with cash.