Tencent to use social networks for credit-rating services

It seems that people may need to carefully select the friends they make online as Chinese Internet giant Tencent Holdings Ltd is about to launch a consumer credit rating service based on an individual's online social networks.

The Shenzhen-based Tencent said on Friday that it will soon roll out its consumer credit information service in an aim to help financial organizations improve their risk management abilities and enable more people to get easy loans and raise credit awareness, especially among young people.

The Internet giant, which owns popular instant messaging app mobile QQ and WeChat, is a firm believer that birds of a feather flock together. By analyzing the "quality" of people's social networks, combined with each individual's online behavior, such as whether or not to pay bills on time, Tencent said it can provide useful information to help financial institutions know their potential debtors better.

Daniel Wu, general manager of Tencent Credit Bureau Co Ltd, said the company has a vast social networking data and it is able to help 500 million people, who don't have any experience in borrowing money from banks, to build up their credit information.

In the traditional way, banks need to check individual's credit records, such as credit card records, before issuing a loan. However, only 20 percent of China's population have credit cards, which means the remaining 80 percent cannot get any kind of endorsement if they want to take a loan.

"About 800 million people in China have demands for various kinds of financial services, but the current credit system can only cover 300 million people. We can help meet the demand of the other 500 million by analyzing the massive amount of data generated from all kinds of footprints they leave online," said Wu.

According to Tencent, its instant messaging tool QQ alone has about 800 million active users. Industry observers said by launching the consumer credit rating service, Tencent can tap into a market worth hundreds of billions of yuan.

"Tencent's business empire is based on social networks. It has accumulated a lot of data by providing all kinds of tools to help people connect with each other. The credit rating service can help Tencent leverage its massive social networking data, commercialize it and eventually boost its income," said Wang Weidong, an analyst with iResearch Consulting Group.

He said the booming development of Internet finance sector in China has led to a surge in the demand for consumer credit information.

Tencent's rival Alibaba Group Holding Ltd is also moving into the same direction. The People's Bank of China, the central bank, has already given the nod for eight companies, including Tencent and Alibaba, to open their consumer credit information business, and is expected to offer them the official operation licenses soon.

The two companies compete in a wide range of business sectors. However, insiders said in consumer rating business it is difficult to say who will be the leader.

"Alibaba's rating is more based on people's online shopping behavior while Tencent's based on social networks. It is likely that the two will come up with different ratings for the same person," he said.