OPEN SESAME
From shopping online to renting bikes, Chinese citizens are contributing to the fabric of their own supervision
On June 1, the PRC’S new internet safety law, requiring users of all internet services in the country to register under their real name, took effect with barely a passing mention in the mainland media. Instead, the main story was about the opening of China’s first automated convenience store, Bingobox, in Shanghai, and the similar ventures that followed, nicknamed “viral enterprises” by a rash of tech and commerce publications.
Coincidence? It’s hard to say. Either way, the events of last summer are a crash course in Chinese governance in the digital age. Laws, regulations, and a surveillance infrastructure from above are deemed almost irrelevant, compared to the innovations of private companies, many of which have convinced consumers to hand over their personal data willingly— even enthusiastically.
The Bingobox automated store, for instance, operates using steps that are, by now, second nature to most cellphone users in China: Users scan a quick-response (QR) code and register with their government-issued ID number to open a Bingobox terminal, and pay with Wechat or Alipay apps, both systems that require real name registration. Tao Café, the automated outlet of e-marketplace Taobao, adds face-scanning, expediting the process by simply charging the shopper’s Taobao or Alipay account for items as they walk out.
A country-sized version of Tao Café seems a likely direction for the Chinese government’s controversial “social credit” scheme, which aims to go into effect by 2020. To media in the West, the prospect of databases and “trust” scores assigned to each Chinese citizen based on their societywide data footprint—in areas like debt repayment, criminal record, job performance, and more—seems like surveillance.
It’s telling, however, that in 2015, the People’s Bank of China (PBOC) assigned the task of running pilots of China’s first nationwide consumer credit-rating system to eight private companies—among them Ant Financial Services, which is owned by Alibaba.
Data giant China Rapid Finance, though not part of the PBOC pilot program, is another major player with access to data from ubiquitous social-media app Wechat and its Wechat Wallet service. Ant Financial, which runs the burgeoning Sesame Credit, has the Alipay app, responsible for a massive chunk of China’s online payments.
To experts who study the nexus of data and society, this choice was unsurprising. “Data that companies collect used to be seen as the ‘exhaust’ of the digital age: whether it’s your personal information that they ask for, or your activity or even meta-data about your activity,” says Peter Chow-white, founder of Simon Fraser University’s GENA Lab, a center for research on the social and organization impact of data. “But for many companies now this is their primary purpose, either to use [the data] themselves or sell
to third parties, or even share with the government.”
Chinese tech entrepreneur Jack Ma had been more explicit—in a 2015 talk, he called data “the most valuable asset” of his company Alibaba, the developer of Taobao and parent company of Ant Financial Service. Alipay’s rating system, Sesame Credit, is currently China’s most widespread, with a variety of high-profile partnerships: A high credit score brings benefits like expedited visas to Singapore and Luxembourg, as well as deposit-free bike sharing, hotels stays, and, as of October, apartment rentals from participating developers in eight Chinese cities.
Alipay keeps its calculation of credit scores a secret: It’s based on some combination of the user’s credit history, ability to fulfill contracts, the submission of personal information, behavior and preference in purchasing, and relationships with other users in their Alipay “friend” list. Generally speaking, though, scores can be raised by frequent purchases with the app or just from making one’s information more complete—for example, by filling out the “education” and “work” fields of the profile page. Users have even reported that using the app’s “real name purchase” services, such as booking hotels or buying insurance, have benefited their score more than a regular Taobao spree.
At the time of writing, there are no direct penalties for having a low Sesame Credit score, and signing up is technically optional (though opting out is complicated). Yet as commerce and services in China become more technology-driven, simply getting left behind can be punishment enough. In October, a supermarket in Yibin, Sichuan province, courted controversy by making a high Sesame Credit score a hiring requirement; Alipay has already sponsored one campus career fair in Hangzhou in 2016, where recruiters looked at students’ scores, supposedly as part of a “lesson” on the importance of good credit.
A rash of new app-driven “sharing” services—from umbrellas to power banks—as well as novelty experiences like automated stores, are now available only to those who either borrow on credit or register their name—or pay a deposit with a mobile app, which creates data on “behavior and preference” regardless. Then there’s simply peer pressure: Alipay has a button allowing users to show off their scores on Weibo, and users of online dating platform Baihe, can even make the score part of their profile. Editorials advocate Sesame Credit as the “strengthening of middle class values” or “civilized qualities, a sentiment also found in the government’s view of social credit, a factor of “social advancement and civilized development.”
Globally, according to ChowWhite, internet culture is seeing a contradiction “where people are becoming more aware than ever about their privacy, and increasingly concerned about it, but we don’t behave like we’re concerned.” Even Chinese web users, who have never enjoyed robust legal protection for
CONSUMERS ARE IN TOO DEEP TO OPT OUT OF THE DATA REVOLUTION NOW
When Zhao, a college student, was sued in civil court over a debt early this year, she saw her “Sesame Credit” ranking plummet overnight. The court had shared a list of defendants with Sesame, who downgraded her to the lowest-possible rating and had labeled her a “laolai”— basically a deadbeat who doesn’t pay loans. Zhao feared for the consequences upon graduation in July: “Will it influence my job seeking negatively if these credit records can be checked online?” she asked People. cn.
That may be the least of her worries. Authorities plan to take the results of several trial “credit” programs being run by different private companies, then decide how to integrate and implement them nationwide by 2020. To avoid potential conflicts of interest, allay concerns over privacy, and reduce the possibility that private businesses could gain a cartel-like grip on the country’s finances, the PBOC is now expected to either merge the data into an external third partner, or create an industry regulator to monitor all the schemes.
“Cashless” payment systems have become incredibly popular in recent years—52 percent of Wechat users conduct less than 20 percent of transactions with cash, and consumers spent 5.5 trillion USD through Chinese mobile-payment platforms, nearly 50 times more than US citizens, according to a 2016 Tencent Research Institute report. It is through these online payment platforms that the seeds for a much more comprehensive socialcredit ranking have been planted. By taking data from these widely used online payment accounts— and assessing the social mobility of individuals’ payment histories—private companies already have a leg-up in developing these schemes.
But what kind of data are we talking about?
Sesame Credit and China Rapid Finance aim to provide profiles of the app users that can be used by third parties to assess the reliability of prospective borrowers for loans.
These third parties at present are made up of a smattering of clients who offer financing under much less onerous requirements than major state-run banks. One player is the peer-to-peer (P2P) lending industry, which is worth a potential 60 billion USD in China, but is riddled with Ponzi schemes and failed loans due to lack of regulations. Technode reported that, at the close of 2016, there were 816 billion RMB worth of outstanding P2P loans on the collective books.
The industry has been growing at dizzying speed, but has often been in the headlines for the spectacular collapses of its companies, or accusations of loan sharking and violence. Recent high-profile scandals involve “naked loans”—when cashstrapped, usually female university students submit nude pictures of themselves as collateral for high-