The third personal credit license may be issued soon!

Pan Gongsheng, the governor of the People’s Bank of China, recently announced at a press conference held by the State Council Information Office that the People’s Bank is guiding Qiantang Credit in its application for a personal credit license in conjunction with the Zhejiang Provincial Government.

Compared to Baihang Credit and Pudao Credit, which are already operational, Qiantang Credit has faced a much more difficult journey in applying for the personal credit license. As early as November 26, 2021, the People’s Bank had announced that it had accepted Qiantang Credit’s application for personal credit services. More than two years have passed, and the People’s Bank has still not issued a decision.

The challenging path for Qiantang Credit’s license application may be influenced by the ‘direct connection interruption’ and major shareholder restructuring. From the perspective of equity structure, both Zhejiang Tourism Investment Group Co., Ltd. (referred to as ‘Zhejiang Tourism Group’) and Ant Technology Group Co., Ltd. (referred to as ‘Ant Group’) hold 35% stakes, making them the largest shareholders.

As the restructuring of Ant Group is essentially complete and policy signals are clear, the issuance of Qiantang Credit’s personal credit license may accelerate. Several industry experts have stated that the issuance of Qiantang Credit’s personal credit license is of positive significance to the industry and will help align personal credit infrastructure with the development of the digital economy.

Qiantang Credit’s Challenging Path to Licensing

Ant Group’s application for a personal credit license began with the implementation of the ‘Interim Measures for the Supervision and Administration of Financial Holding Companies’ that landed in September 2020. These measures brought Ant Group under regulatory scrutiny, resulting in three regulatory interviews within six months. The regulatory rectification plan required Ant Group to bring all its financial activities under financial supervision, apply legally for the establishment of a financial holding company if eligible, sever improper connections between payment tools and other financial products, and prudently carry out internet lending and insurance business with licensed personal credit services.

On November 26, 2021, the People’s Bank of China publicized that it had accepted the personal credit business application from Qiantang Credit Limited (in preparation), referred to as “Qiantang Credit.” According to disclosures, Qiantang Credit has a registered capital of 1 billion yuan, with both Zhejiang Tourism Group and Ant Group holding 35% stakes each, making them the largest shareholders. Transfar Group holds 7%, Hangzhou Financial Investment Group holds 6.5%, Zhejiang E-port holds 6.5%, and Hangzhou Xishu Enterprise Management Partnership (LP) holds 10%.

The proposed list of directors, supervisors, and senior managers includes Chen Long, Dong Zhanbin, Yu Quan, and Chen Xinchun as shareholder directors; independent directors include Guo Tianyong, Hu Shaoxian, and Zhang Jingzhong; supervisors include Zhou Shengxue, Zhao Lei, and Cheng Zhijuan; senior management includes President Dong Zhanbin and CFO Kong Lingren.

Reporters learned that while Baihang Credit and Pudao Credit took about one to two months from application acceptance to approval, Qiantang Credit has been waiting for more than two years since its application was accepted, and the People’s Bank has yet to issue a decision. The path to licensing appears to be fraught with challenges. Pan Wenyuan, director of the Credit Research Center at the Shanghai Huaxia Economic Development Research Institute, told reporters that the difficulties in Qiantang Credit’s licensing mainly stem from the central bank’s cautious approach. Personal credit licenses involve multiple factors such as personal privacy protection, data compliance, and regulatory needs, requiring time for a comprehensive assessment.

Liu Xinhai, the executive deputy director of the Credit Management Committee of the All-China Mergers and Acquisitions Association and vice president of the Beijing Credit Society, analyzed several reasons for Qiantang Credit’s challenging path: one is the impact of Ant Group’s restructuring in recent years; another is the unique formation of Qiantang Credit, which differs from traditional global credit institutions, adding complexity. With the current strict global regulation of personal data, regulatory approvals are particularly cautious.

Wang Pengbo, a senior analyst at Broad Consulting, told reporters, “It might be due to not meeting the central bank’s acceptance criteria. The central bank might also be concerned about the actual control a single institution has over its personal credit business, questioning whether it can maintain the independence that a third-party credit agency should possess. If the data is biased, it could lead to assessment discrepancies. Of course, the decision might also be based on macroprudential principles.”

Impact of the License on the Industry

However, as Ant Group’s restructuring is essentially complete and the policy signals for the development of the credit market are clear, Qiantang Credit is experiencing new developments. Pan Gongsheng, the governor of the People’s Bank of China, recently announced at a State Council Information Office press conference that the People’s Bank, in conjunction with the Zhejiang Provincial Government, is guiding Qiantang Credit in its application for a personal credit license.

Pan Wenyuan believes that the central bank is further promoting the development of the credit market and sending positive signals, especially since Qiantang Credit has a higher private capital ratio compared to the first two institutions. Introducing market-oriented personal credit institutions under the premise of controllable risks can foster healthy competition in the industry and boost market confidence.

Pan Wenyuan states that Qiantang Credit’s role is primarily based on Ant Group’s actual application scenarios. Unlike Baihang Credit and Pudao Credit, which mainly serve the public market, Qiantang Credit has a multidimensional data advantage. The establishment of Qiantang Credit can enrich the data sources of the existing personal credit industry from a data collection perspective; from the perspective of serving the financial industry’s data needs, personal credit companies will become important participants in the financial industry’s data service providers, leveraging data resources and licensing advantages to increase market share.

Wang Pengbo points out that the personal credit industry requires participation from institutions representing various types to meet market demands. Credit is the foundation and underlying business of finance, supporting lending. Under the requirements of mandatory licensing and the disconnection of direct financial information, the value of personal credit licenses will gradually increase. As the financial industry develops progressively, the application scenarios for credit will become richer and more diverse.

Liu Xinhai states that China has the world’s largest consumer market and plans to further develop its consumer economy in the future. Efficient and diversified personal credit services are important digital economic infrastructures. There needs to be a central bank credit system as public infrastructure, state-backed credit institutions to ensure data security, and personal credit institutions based on large technology platforms to compete and promote each other, making the entire personal credit market more dynamic.

Liu Xinhai points out that the future establishment of Qiantang Credit’s personal credit license will have a positive impact on the industry: on one hand, it will help to align personal credit infrastructure with the development of the digital economy; on the other hand, being based on a large technology platform, market-driven incentives and specialized operations can bring technological and business model innovations to the field of personal credit.