China’s Social Credit Score – Economic Genius or Killer of an open society?

I am in the London underground, and my mobile tells me if the person sitting next to me has defaulted on their loans. I can now decide if I still want to sit next to them. – Imagine a world where that could be true

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I am trying to book a Eurostar holiday, and I get told on their site that, I can’t travel on Eurostar because I missed my credit card payment last week – Imagine a world where that could be true.

I walk into a Starbucks and I get a free drink because my mortgage payment was done on time – thanks to my direct debit. I could go on, but you get the idea.

China is working on a Social Credit Scoring system that could pretty much make life look like what I have described. For me, it’s too intrusive. But in a world (within China) where Google has a single digit market share, thanks to censorship, nothing is intrusive (looks like).

The Chinese government claims that it needs the system to promote social and economic trust, and plans to launch the system by 2020. No wonder, China tops the world in AI patents. They are already piloting the system in several Chinese cities.

“allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step.”

– From the founding document of the social credit scoring system

The government’s drive to get the social credit score underway is largely inspired by existing private setups like Sesame credit. Sesame credit is the credit system created by Ant Financial. Ant financial and Tencent have managed to create a universe of consumer data through their ecommerce and messaging offerings. And they leveraged that data to provide a wide suite of financial services. The worrying aspect is that the government’s credit scoring initiative may tap into this data.

Economists highlight that China’s growth, at least when compared to its neighbour India, has slowed down. It may not mean much at this point as China’s economy is almost 4 times bigger. But the slowest growth rate in 30 years is something that has got the government thinking.

South East Asian countries like South Korea struggled to transition from input based growth to productivity based growth. In China’s case, the labour force has maxed out, and now they are focused on driving productivity. Is this social score system designed to make people more productive?

In a survey conducted last year by a European researcher, 80% of the respondents voted in favour of this system. The challenge is that the social credit scoring system has a good chance of making the rich – richer and the poor – poorer. Getting on the economic ladder would be harder for the bottom of the pyramid. However the Chinese government chooses to look at it differently.

Keeping trust is glorious and breaking trust is disgraceful

Just that line sounds so binary and feels mutually exclusive and is an antithesis of an open society. Then there is this philosophical argument of what’s more important? An egalitarian society where privacy is respected, or an ethical, moral, compliant and conformed world. There is no binary answer to that either.

Only time will tell if this system delivers the desired outcome – at least in a Chinese sense. Watch this space.

Insurtech Front Page Weekly CXO Briefing – Blockchain not dead in insurance

Blockchain insurance

The Theme last week was Incumbents on customer engagement.

The Theme this week is Blockchain not dead in insurance. Blockchain, or cryptocurrency is dead for many investors, but it is still a promising future for insurance.

For more about the Front Page Weekly CXO Briefing, please click here.

Incumbents embracing InsurTech is a common theme in our posts. This time, it’s about customer engagement.


Story 1: Ant’s Alipay uses blockchain to process health insurance claims in seconds

Extract, read more on Ledger Insights:

“Alipay is processing health insurance claims within seconds using a blockchain system, state-owned Securities Daily reported yesterday.

Alipay runs a free health insurance product as part of its rewards system. When users pay offline with AliPay, they earn bonus points towards the health insurance product. The plan is run with one of China’s largest life insurers Taikang Insurance. Within a month of launching in April 2017, 13 million people had signed up for the rewards program which amounts to 11% of Taikang’s online users, according to Asean Today.”

Ant Financial is the Fintech arm of Alibaba and is known for its exploration spirits. They tried to launch a mutual insurance project in October this year, but was compromised due to a rumored and undisclosed conflict of interest. One fails, keeps going with another. They certainly still have faith in blockchain.


Story 2: State Farm turns to blockchain for subrogation

Extract, read more on Digital Insurance:

“State Farm is working on a blockchain application to assist in subrogation, leveraging open-source software and in partnership with at least one other insurer.

The company’s goal is to establish whether blockchain technology can make subrogation more efficient, in particular by preventing repetitive transfers of funds back and forth between insurers.”

Subrogation is a relatively new field for applications of InsurTech and State Farm is getting a first-mover advantage.


Story 3: Australia: National Transport Insurance Partners on Blockchain for Food Safety Trial

Extract, read more on Cointelegraph:

“Australia’s National Transport Insurance (NTI) has announced it will trial a blockchain system to improve supply chain integrity for beef exports abroad. The trial was reported by local transport industry magazine Fully Loaded ATN on Dec. 10.

NTI will reportedly be partnering with BeefLedger, an Australian “integrated provenance, blockchain security and payments platform,” which combines blockchain with Internet of Things (IoT) technology to bolster product credentials across the supply chain.”

Both NTI and BeefLedger are not well known in the InsurTech community. And the alleged application is not insurance-centered. However, it’s a trial involving trans-border business, origin tracing and liability monitoring. It can be enlightening for insurance, if it pans out.

2018 is a very bad year for blockchain enthusiasts, but on the bright side, we might have entered post-bubble era just like the early 2000s. With less hype, expectation and more commitment, blockchain can still find its appropriate values.

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Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

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