In 2015, when Lazarus Liu moved home to China after studying logistics in the United Kingdom for three years, he quickly noticed that something had changed: Everyone paid for everything with their phones. At McDonald’s, the convenience store, even at mom-and-pop restaurants, his friends in Shanghai used mobile payments. Cash, Liu could see, had been largely replaced by two smartphone apps: Alipay and WeChat Pay. One day, at a vegetable market, he watched a woman his mother’s age pull out her phone to pay for her groceries. He decided to sign up.
To get an Alipay ID, Liu had to enter his cell phone number and scan his national ID card. He did so reflexively. Alipay had built a reputation for reliability, and compared to going to a bank managed with slothlike indifference and zero attention to customer service, signing up for Alipay was almost fun. With just a few clicks he was in. Alipay’s slogan summed up the experience: “Trust makes it simple.”
Alipay turned out to be so convenient that Liu began using it multiple times a day, starting first thing in the morning, when he ordered breakfast through a food delivery app. He realized that he could pay for parking through Alipay’s My Car feature, so he added his driver’s license and license plate numbers, as well as the engine number of his Audi. He started making his car insurance payments with the app. He booked doctors’ appointments there, skipping the chaotic lines for which Chinese hospitals are famous. He added friends in Alipay’s built-in social network. When Liu went on vacation with his fiancée (now his wife) to Thailand, they paid at restaurants and bought trinkets with Alipay. He stored whatever money was left over, which wasn’t much once the vacation and car were paid for, in an Alipay money market account. He could have paid his electricity, gas, and internet bills in Alipay’s City Service section. Like many young Chinese who had become enamored of the mobile payment services offered by Alipay and WeChat, Liu stopped bringing his wallet when he left the house.
If you live in the United States, you are by now accustomed to relinquishing your data to corporations. Credit card companies know when you run up bar tabs or buy sex toys. Facebook knows if you like Tasty cooking videos or Breitbart News. Uber knows where you go and how you behave en route. But Alipay knows all of these things about its users and more. Owned by Ant Financial, an affiliate of the massive Alibaba corporation, Alipay is sometimes called a super app. Its main competitor, WeChat, belongs to the social and gaming giant Tencent. Alipay and WeChat are less like individual apps than entire ecosystems. Whenever Liu opened Alipay on his phone, he saw a neat grid of icons that vaguely resembled the home screen on his Samsung. Some of the icons were themselves full-blown third-party apps. If he wanted to, he could access Airbnb, Uber, or Uber’s Chinese rival Didi, entirely from inside Alipay. It was as if Amazon had swallowed eBay, Apple News, Groupon, American Express, Citibank, and YouTube—and could siphon up data from all of them.
One day a new icon appeared on Liu’s Alipay home screen. It was labeled Zhima Credit (or Sesame Credit). The name, like that of Alipay’s parent company, evoked the story of Ali Baba and the 40 thieves, in which the words open sesame magically unseal a cave full of treasure. When Liu touched the icon, he was greeted by an image of the Earth. “Zhima Credit is the embodiment of personal credit,” the text underneath read. “It uses big data to conduct an objective assessment. The higher the score, the better your credit.” Further down was a button that read, in clean white characters, “Start my credit journey.” He tapped.
In 1956 an electrical engineer named Bill Fair and a mathematician named Earl Isaac started a small tech company out of a San Francisco apartment. They named it Fair, Isaac and Co., but the business eventually came to be known, for short, as FICO. Their chief innovation was using computer-driven statistical analysis to translate people’s personal details and financial history into a simple score, predicting how likely they were to pay back loans. Before FICO, credit bureaus relied in part on gossip culled from people’s landlords, neighbors, and local grocers. Applicants’ race could be counted against them, as could messiness, poor morals, and “effeminate gestures.” Algorithmic scoring, Fair and Isaac argued, was a more equitable, scientific alternative to this unfair reality. FICO’s approach eventually caught on among the credit bureaus—TransUnion, Experian, and Equifax—and in 1989 FICO introduced the credit score we know today, enabling millions of Americans to take out mortgages and rack up credit card bills.
During the past 30 years, by contrast, China has grown to become the world’s second largest economy without much of a functioning credit system at all. The People’s Bank of China, the country’s central banking regulator, maintains records on millions of consumers, but they often contain little or no information. Until recently, it was difficult to get a credit card with any bank other than your own. Consumers mainly used cash. As housing prices spiked, this became increasingly untenable. “Now you need two suitcases to buy a house, not just one,” says Zennon Kapron, who heads the financial tech consultancy Kapronasia. Still, efforts to establish a reliable credit system foundered because China lacked a third-party credit scoring entity. What it did have by the end of 2011 were 356 million smartphone users.
That year, Ant Financial launched a version of Alipay with a built-in scanner for reading QR codes—square, machine-readable labels that can hold over 100 times more information than a standard bar code. (WeChat Pay, which launched in 2013, has a similar built-in scanner.) Scanning a QR code can bring you to a website, or pull up an app, or connect you to a person’s social media profile. Codes started showing up on graves (scan to learn more about the deceased) and the shirts of waiters (scan to tip). Beggars printed out QR codes and set them out on the street. The codes linked the online and offline realms on a scale not seen anywhere else in the world. That first year with the QR scanner, Alipay mobile payments reached nearly $70 billion.
In 2013, Ant Financial executives retreated to the mountains outside Hangzhou to discuss creating a slew of new products; one of them was Zhima Credit. The executives realized that they could use the data-collecting powers of Alipay to calculate a credit score based on an individual’s activities. “It was a very natural process,” says You Xi, a Chinese business reporter who detailed this pivotal meeting in a recent book, Ant Financial. “If you have payment data, you can assess the credit of a person.” And so the tech company began the process of creating a score that would be “credit for everything in your life,” as You explains it.