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Credit Scores to Social Credit Scores: Developments in China’s Social Credit Scoring Ecosystem

Financial markets operate on trust. Therefore, we have lenders seeking assurance of the creditworthiness of the borrower before lending. The concept of credit scores was built upon this principle and involved assessment of existing and previous credit history, available assets, and the ability to repay the lender back.

The FinTech industry has developed solutions for more accessible banking and investment alternatives, including mobile-based payments, e-wallets, peer-to-peer lending, digital KYC, and so on. These solutions have revolutionized the way people participate in the financial markets and made it easier to conceive of a more financially inclusive world. While financial technology continues to realize its potential in financial inclusion, there is another significant event of its transformative utilization in a major part of the world.

In 2015, in context of multiple ponzi schemes creating panic and distrust in its financial markets, China announced its vision for a nationwide social credit system that would, as the State Council's official document stated, “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step” in the form of a ‘Social Credit System.’

Until as recently as 2011, there were 460 million citizens in China tha ...

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