Imagine what it would be like if your credit score determined your social standing.
This is actually happening in China — it’s not just the stuff of dystopian science fiction anymore.
China is combining credit scoring, social media, and e-commerce incentives to reward people for obeying the government.
Phoenix Rising
Until very recently, China lacked the kind of payment infrastructure that industrialized nations have had in place for decades. It lacked credit scoring, like what the U.S. has had since 1989, when Fair Isaac first unveiled its FICO scores.
Essentially making up for lost time, China in recent years has embraced mobile commerce so aggressively that it has leapfrogged ahead of the rest of the world and is now considered the leader in mobile commerce.
The two main players in China’s mobile commerce, AliPay and WeChat, are “less like apps than entire ecosystems,” writes Mara Hvistendahl in Wired.
AliPay’s ecosystem includes the world’s largest retailer, Alibaba — yes, it handles more transactions than even Amazon does and boasts 550 million active mobile users.
Credit Score Overdrive
The AliPay ecosystem includes Sesame Credit, an app developed in partnership with the Chinese government. It acts as a credit bureau — except that it measures creditworthiness not just based on people’s financial behavior but also their social activities.
A Sesame Credit score also reflects who someone is friends with and how they interact — this information is harvested from a social media component of the AliPay ecosystem.
One way or another Sesame Credit is assigning numerical values to the types of products and services a person purchases, who their friends are on social media and what they post about on online.
All a Game?
Sesame Credit’s parent company Ant Financial works in partnership with gaming company Tencent (which is also the corporate parent of the other big mobile commerce company WeChat).
Tencent infuses the credit scoring with gamification capabilities — this means taking something that already exists and infusing game-like mechanics to motivate participation, engagement, and loyalty.
The result literally rewards people for obeying the government.
Fortunately, as of this writing, Sesame Credit remains an opt-in system, meaning you have to sign up for it, but it’s scheduled to become mandatory in 2020.
No Unsubscribing
Between now and then, it’s possible there’s time for Sesame Credit to improve upon its scores before they become mandatory — but they already lack an ability to unsubscribe once you sign up for it.
Another problematic aspect: Once a Sesame Credit score drops, there can be a downward spiral of further declines that begins with losing incentives confined to those with high scores.
At a certain point, low scores have much graver consequences than simply being declined for loans, credit cards or jobs involving money handling (many American banks credit score job applicants).
You begin to lose privileges that reflect your level of trustworthiness. For instance, you are subjected to more thorough searches when you pass through Chinese customs. Eventually, if you score low enough, you may be declined for social security and even welfare.
That downward spriral invokes scenarios from dystopian science fiction — like the episode of Black Mirror in which people’s social scores determine where they can live and work.
Privacy Issues
If anything, looking at China’s credit scoring system provides interesting contrasts with the privacy vulnerabilities of U.S. credit bureaus — which may have served as the original inspiration for the Wired article mentioned above.
Barely three months ago, Equifax announced that hackers exposed up to 143 million Americans’ credit files along with those of people in other countries. It remains unclear whether and to what extent the breach triggered any identity thefts among those affected so far.
Readers, how does learning about China’s credit scoring system make you feel about U.S. credit bureaus?
Jackie Cohen is an award winning financial journalist turned turned financial advisor obsessed with climate change risk, data and business. Jackie holds a B.A. Degree from Macalester College and an M.A. in English from Claremont Graduate University.