China has potential to be a “huge market” for alternative credit decisioning, ZestFinance Chief Executive Douglas Merrill told Auto Finance News.
“Only 20% of Chinese citizens have data available in the country’s primary credit bureau, The People’s Bank of China,” he said. “I think there’s a lot of opportunities for financing, I’m pretty excited about China auto.”
Since 2009, China has become the world’s largest new-car market, according to Deloitte Consulting. However, China’s auto finance rate is relatively low; for instance, 84% of the new cars sold in the U.S. in 2014 were financed, compared with 20% in China, according to Experian.
The Chinese auto finance rate rose to 38% in 2016, and is expected to rise to 55% in 2021, according to ReportLinker. “[China is] a really hard nut to crack,” Merrill said. “If you think about it, you simultaneously have an underwriting problem and a marketing problem.”
People need to be convinced to purchase on credit, then companies have to figure out if those people are creditworthy. ZestFinance works with JD Finance and Baidu in China, using transactional and behavioral data the companies provide.
“To really change the game for credit and financing in China, we’re going to need to find a way to share that data more effectively,” he added.
