When Ant Financial, the Alibaba conglomerate's payment business, becomes public, its potential market capitalization may reach $ 120 billion, surpassing giants such as Goldman Sachs.
Alipay, Ant Financial's mobile payment platform, has 520 million users.
The platform features an innovative credit rating method, named Sesame Credit. This alternative valuation method, similar to Fico in the US and Schufa in Germany, is particularly intriguing, writes the Financial Times.
The credit rating gives access to a loan, and the private company calculates it based on consumer habits and social environments of customers, of course, also taking into account their official credit history.
Exciting, however, this method provokes a lot of doubts. The Chinese Central Bank, for example, does not respond very much to this so-called "social credit" rating that is used by Alibaba and its rivals.
This month, the regulator ordered the technology giant Tencent to stop the national distribution of its version of Sesame Credit, although in 2015 it did the opposite - encouraging such initiatives.
Private credit rating schemes are often associated with China's large-scale plan to monitor the behavior of its citizens by 2020 to "provide benefits to those worthy of trust and to discipline those who do not deserve trust."
Thus, Chinese citizens who do not pay fines or allow themselves not to purchase a bus ticket may be penalized with travel bans or refusals to recruit.
Sesame Credit and similar private alternatives are not as cruel as the official plans of the authorities because they are designed to facilitate business processes. Alipay insists they are under no obligation to provide user data to the government without the permission of the users themselves.
However, these private methods of social credit rating are deficient.
First of all, these systems are developed by technology companies that, unlike banks, operate under much tighter regulations on the administration and archiving of personal data.
Joseph Stiglitz, an American Nobel laureate for economics, said 30 years ago that banks act as "social accountants", lending only to people they believe to be reliable.
Nowadays technology companies are beginning to take on this role, but with far fewer regulations and restrictions.
Banks collect gigantic arrays of information about their customers' spending and personal habits, but due to data protection regulation and tradition, financial institutions cannot use this database in ways they could if there were no restrictions.
Banks rely on industry-standard credit assessments to determine whether to grant a loan.
On the other hand, technology companies behave as institutions that can collect and analyze any personal information that comes to them, stating that they respect confidentiality.
This includes everything that can be gathered through citizens' mobile phones - not just their location, but also details about their social environment, activities in social networks, and the products and services they buy.
The potential for misuse of such data is unlimited, especially as technology companies operate under far less regulation than financial institutions.
Secondly, there is a serious discrepancy in the principles of credit rating. Banks, basically, make a good credit score when the consumer draws a small loan, as this is considered a sign of self-control.
However, social credit ratings work on the reverse - consumers get the right to buy and rent things through the online platform to build a circle of active and highly rated friends. Social rating is becoming a race where people are based on higher activity, similar to a financial version of standard social networks or mobile games.
Compared to standard credit ratings, their social partners are working backward - no one knows how the Sesame Credit algorithm calculates consumer ratings ranging from 350 to 950 points.
Thirdly, unlike the US Fico rating, using three major credit bureaus and all US banks, the social credit ratings are separate and are in competition with each other.
To achieve a high Sesame rating, the user must primarily use Alipay. There is a conflict of interest here - the payment platform provides payment services, and again it prepares customer ratings - in other words, if the algorithm increases the user's rating, it will have the incentive to spend more.
China's Central Bank has realized late that giving power to technology companies to produce a credit rating, has trapped. The real credit rating should be treated with particular care before attaching to everyone, determining their reputation, as is their ability to borrow money.
"There will be a market for civic ratings that can change our lives fundamentally," said Gerd Gigerenzer of the Max Planck Institute for Human Development in Berlin, an advisor to the German Ministry of Justice.
One of the possible solutions to the problem is who will store and hold the information generated by the citizens. This should not be the government, nor the private companies, but the citizens themselves.
Thus, instead of transferring control of their personal data to corporations, citizens must remain in their hands. Standard credit ratings work in a way that allows customers to keep their ratings, whether they change the banks they rely on.
The new European regulation on data protection, which comes into force from May this year, will allow users to take with them the information a company collects for them to provide it to another company if they decide.
Many countries are already seeing the threat of huge masses of data owned by private companies. Due to similar motives, the US banned Ant Financial last month from acquiring MoneyGram for $ 1.2 billion.
