Fifteen of Shanghai's commercial banks now have access to a consumer credit information system, paving the road for the introduction of 'real' consumer credit cards in China.
Shanghai Credit Information Services (CIS) set up the Consumer Credit Database System (CCDS) in response to the growing demand for consumer credit facilities in China. The lack of a database until now has prevented the establishment of a true credit card facility. The 1.18 million 'credit' cards in circulation in Shanghai are effectively only debit cards with an overdraft facility.
"They [the Chinese banks] call them credit cards, but you need to deposit money in the account before you can use it," explains Raymond Yu, senior business consultant at Shanghai Huateng Software Systems (Huateng SCUBE) "Then they will charge high interest rates for any overdrafts." The current consumer loan balance is around $6.6 billion, which is almost 100 times the $68 million recorded in the United States in 1995, according to Huateng SCUBE.
CIS has four major shareholders: the Shanghai Information Centre (a government institution); Shanghai Information Investment (the investment arm of the Shanghai municipal government); Shanghai Zhoung Xui Finance & Forex Consultancy; and Lead Tower Enterprise (Shanghai).
The CCDS will be piloted through Shanghai's 15 commercial banks, including the Industrial and Commercial Banks of China, the Agricultural Bank of China, the Bank of China, China Construction Bank and the Bank of Communication. These banks will be able to access the database through a browser-based intranet system in order to assess the creditworthiness of consumers for actual credit cards as well as personal loans. Credit information will be fed into the database from the participating banks and other public agencies (although paradoxically the names of the public agencies will not be released). Yu of Huateng SCUBE says the rules and regulations on privacy are in place to govern this Chinese-first database. Information on 2 million consumers is already on the database.
CIS will launch the CCDS pilot in phases. The database in phase one will contain information on individual consumers only; phase two, business credit information; and, in phase three, business investigation services. CIS intends to compete against international credit information agencies, such as Dun & Bradstreet in China. No foreign banks or credit card companies are involved in the project and have no access to the database, though Yu points out that this scenario will likely change in the future.
Huateng SCUBE is provider of the application software for CCDS. The e-financial software company is also bidding for the job of electronically linking all the post offices in China.