Credit information platform will lift safeguards

The National Internet Finance Association of China recently passed a resolution to jointly launch a personal credit information platform with eight third-party credit service agencies.

The NIFA will hold a 36 percent stake in the forthcoming platform, which is expected to have registered capital of 1 billion yuan ($152 million), and it will invest no more than 360 million yuan in the platform within five years.

The platform will mainly serve online personal lending institutions, in addition to other market players including traditional commercial banks, regulators and third-party credit service agencies.

It will achieve effective integration and full utilization of personal credit information, improve the risk pricing capability and risk management level of relevant market players, and promote the standardized development of internet finance, said financial industry participants and academics.

Wang Zhifeng, vice-president of Wacai, an online personal financial management platform, called the launch of the personal credit information platform "a developmental milestone" in the internet small-loan industry.

"It will help reduce overall risks in the online lending industry and will also enable better supervision of the credit profiles of small-loan borrowers by providing a credit rating service. Such a service is a crucial infrastructure in the industry's transition toward a standard and regulated one," Wang said.

In recent years, it was not unusual to see an individual borrowing from multiple internet finance companies or making fraudulent loan applications, due to lack of personal credit information sharing and coordinated risk alerts.

Data from IntelliCredit, a Beijing-based credit information service provider, show that about 81 percent of applicants for cash loans, a type of small consumer loan, borrowed from multiple lenders for four to 10 times on average.

Now the top regulators will clear the largest obstacle that has hindered the development of the internet small loan sector for years, Wang noted.

"According to the rules, borrowers' default reports will be recorded and shared, which enables a fairly priced risk profile to be built," he said.

Huang Zhen, a professor at the Central University of Finance and Economics, said the NIFA will build an integrated personal credit information sharing mechanism by launching the platform, as the existing credit reporting system cannot meet the demands of small loan companies and peer-to-peer lending platforms, through which individuals could lend money directly to unrelated people and businesses.

"It will also make unified credit reporting standards for various kinds of financial institutions and make decisions on how to use big data, such as tax and lawsuit information, to evaluate personal credit and which data to use," Huang said.

He expected that the platform will expand its membership from the eight third-party credit service agencies, such as Tencent Credit Services and Pengyuan Credit Service Co Ltd, to a wide range of market players, including other credit service agencies and relevant companies with a strong need for personal credit information.