China is still a country without a credit history, despite having one of the most highly developed e-commerce cultures on the planet. As the country’s working class looks to exercise an increasing amount of disposable wealth, getting a loan through traditional channels can be a challenge.
For those who want to avoid China’s notorious shadow banking system, tech companies who’ve been granted micro-loan licenses are picking up the slack.
So how do you evaluate a credit rating for someone who’s never had a credit card? China tech companies believe the answer could be a short questionnaire that not only takes data points from input answers, but also biometrics data like the speed and rhythm of typing, as well as the frequency of typos.
Omni Prime, a Shanghai-based startup in China’s growing mobile credit field, aims to provide micro loan service that specifically targeted at the country’s working class. Its founder and CEO, Stanford alumni Hu Dan, is one of the people looking to reinvent consumer finance for low income entrants with a comprehensive risk evaluating system through an an app called ‘Paymax.’
Before founding Omni Prime, Dan was a VP of Sequoia Capital China, where he discovered a potential financial market in the country’s underserved working class, aged 18 to 30, who mostly live in China’s tier 2 and 3 cities. Like other new micro-loan entrants, they found that a large group of people are willing to purchase high-end electronics but couldn’t produce a credit rating. Paymax targets the working class and others who struggle to build credibility in the traditional banking system.
With Paymax, an applicant can purchase consumer electronics valued more than their monthly earning with just two photos of both their ID card and payroll card as well as a few other personal information points that are specific to the China consumer experience. The app will report the overall fee and interest and monthly payment structure. The background anti-fraud analysis and credit evaluation process take only 15 minutes at most. Then the applicant receives a designated amount of money directly deposited to their payroll cards.
While online to offline is a trending model in China right now, Paymax works the opposite way: from offline to online. The app itself is not available from any official app stores, instead it is distributed by local electronics dealers. Potiential consumers could only download the app by scanning the QR code generated from a salesperson’s WeChat. This special design, as Dan noted, “meets the regular consumer behavior demands of the Chinese working class who rarely have an Apple ID, and it controls the source of the applicants at the same time.”
The risk evaluation system checks the consumer’s credit right upon their registration. The name and phone number will be expanded into hundreds useful variables and then put in to a large verification database in real time. The application procedure has included questionnaires like “I want this phone because….”, different answers will lead different system evaluation route and finally affect the credit score. And of course, evaluates the user on the speed at which they type and the number of corrections they enter.
“Each user will generate 5000 to 10,000 data points, among which more than half are user behaviors related. These are generated via GPS location, sensors and gyroscopes in the phone. We also collect data from users’ social networks, in additional to traditional personal credit history. All the collected data contributes to the final score to determine the likelihood of fraud and users’ creditworthiness,” Li Xuanyi said.
Launched this January, the product has been seen in 30 and more tier 2 and below cities in Jiangsu, Shandong, Guangdong and other provinces, and generated 10,000 transactions per month, according to the company. According to Dan, their business is doubling every two months.
Omni Prime has raised $15 million Series A lead by Sequoia Capital in October 2014 and now it is in the process of raising their Series B round.