The Dark Side of Credit Score and Social Ranking

September 6, 2019
14 min read

You come to the store, fill up your basket with food and go to the counter. Cashier scans everything, it’s 103.59 EUR, the screen lights up, you look at it and smile – transaction is accepted and your account is charged.

Next morning you look at your watch – 8:47, you can still make it. You run up the stairs and get outside – just a couple of blocks left. Finally the office building is near, but it is on the other side of the road and the light is red. It’s 8:56, you don’t have time, you look left and right, let the last car pass and cross the street. 8:59 you’ve punched your card at work – pure luck. 

You get to your desk, get your phone out of the pocket – there are two recent notifications. First, your credit score has been lowered, second – the fine for jaywalking was charged from your account.

This might sound like a utopian future or a conspiracy theory, but this is a reality, at least in China. It started with publicly shaming people using CCTV cameras, facial recognition and billboards to show faces and names of jaywalkers.

As you jaywalk across the street, CCTV picks up your face and sends it to the servers where AI is matching it against the database. This database is also tied up to the credit scoring system – that’s how your score is lowered, and also to the payment system – which lets the government to bill your account for the amount of the fine. 

What helps – all of this technology can be provided by just one company – Ant Financial.

Ant Financial

It all started with the square. In 2011 Ant Financial launched a new version of the Alipay app, with a built-in QR code reader. QR codes can help you with the simplest functions, like scan it and open the website, but in this case it had a monetary function. Waiter could print QR code, so you can tip her, beggars could print it out, so you couldn’t dismiss them with a simple “I don’t have cash on me”. It started to propagate all over China. From high-end restaurants and hotels, to fast-food chains and mom and pop shops. Quickly cash became unnecessary in China. Young and old used mobile phones to pay for things offline. 

It also worked online, when Jack Ma decided to launch e-commerce site Taobao, the company faced a major problem – although the user activity was high, there were very few transactions – people didn’t trust each other with money. That’s when Alipay was added to the mix.

At first it worked like an escrow mechanism. Buyer would send money to the Taobo bank account and only after confirming receiving the item, Taobao released the funds to the seller. There were two issues with this. First, Alibaba didn’t have any sort of financial license, but Jack Ma decided to risk it. Second, there were errors. Chinese banking system was very antiquated with a lot of manual work. So Alibaba started to cooperate with Chinese banks, together with the first partner – the Commercial Bank of China, Alipay created online version of the process that was once manual. Banks started to partner with Alipay and by the year 2010, the company had connections with more than 200 of them in China.

The next logical step and the one users also asked for – keeping balances in the Alipay account. This would allow to use those funds on Taobao and lower the friction for making the transaction and potentially cheaper. Alipay introduced virtual accounts, which allowed the company to provide more financial services in the future.

In its portfolio Ant Financial also has Yu’e Bao – the worlds largest money market fund. Sesame Credit – a private credit scoring company. ZOLOZ – biometric-based identity verification platform. Ant Cash Now – consumer loan service. Insurance services, banks, credit card products and a couple of joint ventures in India, Thailand, South Korea, Philippines, Indonesia, Hong Kong and more.

Ant Financial has well over 700 million users in China (which is about half of the population of the country), it also has passed the 1 billion user mark worldwide. That is one of the factors which allowed it to raise $14 billion with a valuation of $150 billion, which is about the same as the combined market capitalization of Morgan Stanley and Goldman Sachs or all of the FinTech unicorns in US and Europe – combined.

Data Collection

Alipay has everything in its app. You can order food, pay your bills, pay for parking and car insurance, buy movie tickets, it knows about your fines and how well you tip. In Western Internet we are concerned with privacy policies of companies one by one. Facebook has information on you, so does Google, Netflix, Amazon, eBay. Some data brokers try to collect all of it together, buying up everything they can, but there are no incentives for tech giants to sell it. Facebook has to buy information from credit card companies to know what you’ve bought. But here, all of this information is in one app. As you have financial data, social circle and add to that behavioral data and you can “rank” the person pretty easily.

That’s why, when Chinese government decided to issue licenses for the social credit scoring companies, Alibaba was first in line. It was one out of 8 companies who got the license in the beginning of the 2015. With it at hand and all the data it started the development of Sesame Credit.

Sesame Credit

Sesame Credit is a credit scoring system, which analyses all the data available and shows you the score. The range of the Sesame score is between 350-950 points, with 700 and up being excellent credit score and range between 350 and 550 is considered the worst, which will give you more of a punishment than perks. 

As this is still an experiment, Sesame Credit is optional, but nobody knows if it still calculates your score even if you didn’t signup. 

It is reported that credit score consists of your general credit history (35%), financial status (25%)- the amount of money on users Alipay account, online behavior and preference (20%), personal characteristics (15%) and relationships (5%).

Couple of ways the high credit score makes your life easier:

Better treatment at Hospitals

Two years ago Sesame Credit launched a program called “Credit Medical Treatment”, which is available to those with the score of 650 or higher. It allows to cut lines and pay for treatment upfront in the app. If the normal waiting time in the hospital is more than 2 hours, with “Credit Medical Treatment” it drops below 1 hour mark. 

Try out before buying 

On Alibaba’s e-commerce platform Tmall, users with high credit score can try out items before buying them. That way you don’t have a risk of regretting buying decision. Not only that, but there are also frequent promotions, such as the ability to try out the new Ford or some new smartphone for 30 days without the need to buy it afterwards. This is only available to the people with the highest score. 

No Deposits

If you have high enough credit score in many instances you won’t need a deposit when you otherwise would have. One example is bike renting platforms which allow users with credit score of 650 or higher to rent bicycles in the bigger cities in China without deposit.

Not only that, but you don’t need the deposit in other places, like using shared umbrella, or public phone charger. Going back to hospitals and “Credit Medical Treatment”, with the score of over 600 you don’t need a deposit when renting a wheelchair.

It goes even further, in some instances you don’t need a deposit even when you are renting the apartment if you have high enough score.

Libraries

There are even perks in Public Libraries for people with higher scores. If you are eligible, you don’t need to pay a down payment and can set up library card for free. In some libraries you don’t even have to set up a card and just borrow books using your ID.

Lounges at Train Stations

As China’s train stations sometimes can get very crowded, especially in peak seasons, for members with high credit score there are now special lounges, where they can relax. In this case though, you not only need a high credit score, but you need to buy a higher fair ticket or have a platinum status. 

Some of the governments are starting to accept Sesame Credit. For example, users with a score over 750 can apply for Canadian visas without the need for submitting bank statements. You just download the copy of the report in the Sesame Credit app, which is generated specifically for visa application and provide it to the embassy. 

The Dark Side

While the perks are nice, some of the elements of credit systems are Orwellian at best. In some areas of China, when you call person on the phone, the siren sound is played and you hear a recorded message warning that the person is on the blacklist, because they have low social credit score, it also asks you to urge the person to pay the debts. 

You will have a lower score, if you don’t have friends on the platform, or if you don’t pay your bills through Alipay, or even if you don’t buy anything on Alibabas e-commerce websites. It means that to have all the perks of the high credit score you have to be all-in in the Ant Financial ecosystem. If you are someone that uses Alipay here and there, when you apply for Sesame Credit, you will see your score closer to the bottom half. This could incline you to spend more on Taobao, pay your bills through Alipay, that means having more money on the account, which can be then used for other purposes as well. 

People are talking about the green bubbles and Apple ecosystem lock-in, when a student doesn’t get added to the iMessage group chats, because he has Android and the group chat goes green. Now, in China, if couple of friends decided to see, who’s credit score is higher. Their income may differ and so may their habits. When four out of five realize that their score is much higher than that of their friend, what do they do? Is it worth it to abandon the friend just to get their score get higher (or not to get lower)? For some it is. They will either shut him out of their lives or force him to make decisions he doesn’t want to make, just to improve his credit score, so he stays friends with them. 

And after social credit score becomes mandatory in a year, anyone will be able to see anyone’s score. The best case scenario will be, people will try to help and encourage those with lower scores to change some habits. But most probably people will just isolate lower scoring friends, because there is a risk of your score getting lower because of such friendship.

But the biggest and probably scariest controversy about credit score in China was its implementation of the blacklist. Its official name – the List of Dishonest Persons Subject to Enforcement, the catalogue of excluded people. By the summer of 2019 there were 7.49 million names. What is a punishment? You can’t buy plane tickets, the system says our are “not qualified”, you can’t buy properties, take loans or travel on top-tier trains. You can get on the list even for stealing just a pack of cigarettes and there is no appeal mechanism, it just ruins your life. 

One businessman was placed on the list after a dispute with another company, after that the banks cut him off, so he was unable to pay employees salaries, business partners abandoned him. It was like torture. Luckily he was able to pay the court the money it ordered and was removed from the blacklist.

In the west

As China is full steam ahead, the west doesn’t want to be behind forever. There is no shortage of FinTech companies in Europe and US. In 2018 American FinTech companies received $11.9 billion in funding, while European received $3.5 billion. There were 39 VC-backed unicorns in FinTech which combined were worth $147.37 billion. Those are all record numbers.

In Europe the biggest FinTech companies are N26 and Revolut. N26 as of valuation had 2.3 million users and raised $300 million with valuation of $2.7 billion, while Revoluts last valuation was $1.7 billion with more than 3 million users.

N26 has a banking license in Germany, which gives it the ability to provide credit to clients in certain markets, as it does already. Revolut up until recently had an EMI license, which prohibits crediting clients, so it was solely focused on acquiring the user base. In the end of 2018 it also got banking license in Lithuania, which will give the company the ability to issue credits – the goal of every financial company.

In the spring and later autumn of 2014, Google led two rounds of what could be described as quietest $160 million combined investment in Credit Karma. Search engine company didn’t even bother to comment the news. So what is Credit Karma? It allows you to view your credit history weekly for free, which is something unprecedented in the US. Not only does it give you the graph showing your score over time, how it compares to others by income, age and state, how certain factors impact your score, but you can also simulate how your score changes by paying off debt or applying for new credit.

It also allows users to aggregate their financial data from banks, credit cards, loans and transactions and provides information on habits that could be changed in order to improve your financial health.

In the end of 2018 Google obtained banking license in Lithuania, which allows it to provide payment services all over the Europe. 

Those are only preparations, while Apple in partnership with Goldman Sachs already started its expansion into the world of credit. Using its strong stance on privacy and its clout among users it launched Apple Card. Company claims it will give you the lowest interest rate possible. It will show you how to pay off your debt so you don’t have to pay any fees, again, with stated goal of improving your financial health. 

Why do those companies provide you mostly free services, try to grow the biggest user base and promise to improve your financial health, especially Goldman Sachs, who Apple partnered with – not the most beloved bank in the world? Credit is a very profitable business and when you hook the client, for many it is close to impossible to get out. Your good financial health means companies can give you more credit, to the point where your income barely covers the monthly payment. This is the ultimate lock-in.

With cash practically going away all over the world, there is hardly anything we can do in the future other than use those services, or at least one of them to function in the world. The only possibility to somehow distance yourself from all of it, is to not opt-in without thinking about the consequences to all the new features, regardless of how futuristic and fun they sound, second – try to use only services from the companies you trust at least some and third and final advice, which is very important also now – don’t get into too much debt, try to control your finances yourself, understand where you spend it. This will help you immensely going into the future. 

How To Clean Your Apple Card

August 26, 2019
2 min read

If your titanium Apple Card comes into contact with contaminants that can cause stains, follow these steps to clean your card:

1. Gently wipe with a soft, slightly damp, lint-free microfiber cloth.

2.Moisten a soft, microfiber cloth with isopropyl alcohol and gently wipe the card.

Some fabrics, like leather and denim, might cause permanent discoloration that will not wash off.

I was surprised to see the amount of hot takes this Apple support article got last week. Blogs called the card precious, the instructions – insane and wild, and some are proposing you leave your Apple Card at home. Which you should probably do, as it is mostly designed to use with the Apple Pay.

On the last episode of The Vergecast the theory was – Apple didn’t get the physical card before even shipping it (which is nonsense, believe me, I work in the FinTech company) and that Apple became so out of touch, they’ve handled it only in the sterile environment.

It is a white card, every credit card gets warned out and scratched. For some cards it takes longer, for some faster. I think Apple did test the card and that it is precisely why they’ve put this article. It is the same as other cards, it will discolor as any other card and when it does for tech-bloggers – it will be the end of the world. So put the article now, make everyone have a good laugh and forget about it.

MacBook Updates

July 10, 2019
2 min read

Yesterday Apple updated it’s notebook lineup. Let’s start from the good news, MacBook Air got True Tone and lowered price of $1099 (with additional $100 discount for students) and MacBook Pro got quad-core processor from the start and there is no MacBook Escape now – every MacBook Pro has a Touch ID and Touch Bar. The starting price of the device is $1299.

This makes things a little bit more clear, until you start to choose. For $1299, which will you choose, baseline MacBook Pro or MacBook Air with 16GB of RAM (as $200 is the price for doubling the original 8GB). As someone who has an 8GB MacBook Pro, I would kill for more RAM, especially when trying to open a bunch of tabs and making reports in the Excel. But MacBook Air processor is much slower under heavy load. On the other hand the battery on the Air is amazing and it is a bit lighter. 

One would ask, but what about one-port MacBook, but there is none as of yesterday. Apple killed the most portable MacBook it had. So here is what Apple MacBook lineup looks like right now:

If you want Apple computer as of today you have a couple of choices – MacBook Air as a default for everyone, if you want something more fun and simple – iPad Pro and if you need something more powerful – MacBook Pro. 

With cleaning up iPads a couple of months ago and this I like that Apple is bringing back a bit of focus to its products.

Bill Gates Says His ‘Greatest Mistake ever’ Was Microsoft Losing to Android

July 7, 2019
4 min read

Tom Warren at The Verge wrote an article about Bill Gates interview and I want to start with one particular part.

Many had assumed that Microsoft’s missed mobile opportunity was a Steve Ballmer era mistake. [Ballmer famously laughed at the iPhone]() , calling it the “most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard.”

This is a pet peeve of mine. Ballmer did laugh at the price of the iPhone, but what nobody mentions again and again – Apple cut the price shortly after the release of the phone. The price was too high at that time. This doesn’t excuse Microsoft form blowing the mobile, but I think journalists should be factual.

Regarding Gates statement, Google did win the smartphone war, but after that Microsoft became so much more. For the user all of this is good. The more companies there are the better. If Microsoft dominated mobile market together with the desktop, I don’t think anything good would come out of it.

I’m mostly all-in in the Apple ecosystem, but I still use Microsoft Office and gladly pay for it (as Microsoft made it pretty easy). I try not to use Google products, from the privacy perspective. I have Google account at work, but try not to use anything for personal stuff.

Another interesting point is that in technology somehow, we’ve come to the place, where competition is not as strong. We have one dominant player, second – distant one and nothing after that. Take desktop OS as an example, there is Windows which is dominant, than there is a macOS and … it will never be the year of Linux on the desktop. Only now, when the market went to tablets, do you see ChromeOS emerging mostly in schools and universities.

Search is another example. In most of the countries there is Google and nothing else. In post-soviet countries Yandex mostly dominates with Google being second. But even Microsoft with all of its money and position with desktop OS can’t make Bing a worthy contender. And taking it back to the Bill Gates quote – mobile OS. There is Android which dominates market share. There is iPhone which dominates hardware revenue and nothing else. A couple of players tried to enter the market, but without the 3rd party developer support there won’t be users and without users, developers won’t have reason to build their apps for another OS.

Although two players make competition, but duopoly is not the best situation. For most of the people there is no choice. In the mobile OS market, if you want to choose another player you loose a lot. If you want to leave iOS for Android, you will become green bubble, you will lose access to your movies and TV shows, maybe music you bought. You won’t have first party end-to-end encrypted messages. You won’t be able to use Apple Watch. AirPods won’t work as good as with an iPhone.

Consider car manufacturers. First of all there are a couple. You have an actual choice. Japanese, German, French, Italian, Korean, American, etc. If you drove BMW and want your next car to be Audi, what will you lose? At most the membership in the Facebook group. Nothing else. You will just change your car.

Vendor lock-in is an interesting dilemma. I benefit from it a lot in the day-to-day life. Having everything from Apple makes it play together nicely. As an example, I unlock my Apple Watch with my iPhone and later my MacBook with an Apple Watch. It all syncs, I use Apple Music as it works better with a Watch and Siri, although Spotify might even be a better product. But on the other hand, if Apple starts (or one might say already started) making shitty notebooks, it will be hard to buy Windows PC or Chromebook, as they won’t play so nicely with my other devices.

And here we come to a point. Although I am a strong believer in the market making everything right, maybe in some cases some intervention is good? It helped to stop Microsoft dominance, because it felt government looking over the shoulder at every move the company made, so decisions were informed by that. Should the US government break-up Apple? I don’t think so, but we should be asking those questions and not blindly following everything the company does.

Libra – why?

June 25, 2019
2 min read

It has been a while since Facebook announced its cryptocurrency Libra and wallet – Calibra. I’m not a crypto expert, so I won’t explain the differences between real cryptocurrency and stablecoin. I’ve only read that it would be backed by “real” global currencies and short-term government securities, thus almost removing the volatility of other crypto currencies.

With the help of a lot of companies, excluding the biggest financial ones (there are no banks in the list of partners), Facebook will become the new Federal Reserve. It will “print” and “destroy” money as it wishes.

Users will be sold on the idea of easy transfers, as almost anyone has an account with Facebook. You won’t need to think about the currency exchange, you will just use Libra instead of dollars and euro.

I’m not sure what is Facebook thinking. How anyone in the company thinks it’s a good idea. With almost every country looking into Facebook, its role in the elections and the dissemination of fake news. On the day one, a lot of politicians came out saying they want to look into this before Facebook launches it.

Also, why announce it a year in advance? Right now, I’m not sure this will ever see the light of day in its current form. This is either something Facebook will close, just to show that it is over regulated and use it in the future as an example, that it can’t do anything without the government interference. Or governments will take hold of it. Regulate it. And it won’t have an effect, that Facebook hopes to achieve.

Instagram Destroys Our Planet

June 21, 2019
2 min read

I’ve been reading an article on how Santorini became an attraction for Instagram influencers. People go there just to take a photo. Because the place is so photogenic, it looks like it was artificially made for beautiful filters and Instagram.

Unfortunately, I’ve never been there, but heard from a lot of people that it’s mostly unbearable. There are just too many people. I remembered that I felt that way before. Last summer we’ve decided to make a trip to Prague, as I’ve heard only good things and never been there. We’ve drove all the way there, stopping in Krakow and Warsaw in the meantime. 

I liked the architecture and the look of the city. But I disliked the trip overall. There is just too many people. You don’t enjoy walking through the city, because everywhere you turn, there are millions of tourists with phones and cameras. Some by themselves, some in groups.

The other example was in Thailand. There are islands which are destroyed by people. They have to be closed off for tourist in order to fix everything. If you think about it – it’s miserable.

There is an idea to limit the amount of people that can visit an attraction in a day, as an example. I know this limits the freedom of travel, but I’m more and more in the agreement with the proponents of such an approach. 

I love spontaneous trips and going somewhere, my favourite thing is to rent a car and go somewhere. In the above mentioned trip to Prague, we didn’t even book the hotels, we’ve decided during lunch that we wanted to go and just drove. We’ve booked hotels along the way. But if this will give me the ability to enjoy new places more, I will be happy to plan my trips in advance.

Even Apple Is Not Perfect

June 17, 2019
2 min read

Considering some recent Apple struggles with antitrust cases around App Store I want to focus today on the search. I don’t think about it much or often because we are lucky enough to live in the 3rd world country, where there are no App Store search ads, but I have US account also, for the apps that are not available in Latvia, so I’ve seen some amount. 

Of course, I want to preface the story – that it is anecdotal, something I’ve noticed and I’ve heard or read that others noticed this too.

It feels like App Store search adds for no other reason, only to get money from developers. Even on Instagram, there were adds after seeing which I’ve bought something and even was happy. With App Store it feels like there is completely different stories. 

There are in big part two types of ads – first, completely useless apps, rip-offs or apps the whole purpose of which is to extract more money and not providing any service. Those are the apps that are never the right answer for your search query.

Second type, is mostly big developers, who want to get the spot, so the apps from the first category won’t be at the top. 

Considering this, it’s hard to see any good for the users and developers from those kind of ads. I really hope that I am wrong on this and there are small developers who were able to grow sustainable business using App Store search ads, but I’m very doubtful.

Saved For Never

June 16, 2019
2 min read

Some time ago there were no shortages for read it later services. Not it feels like only a handful of them left. There are Instapaper and Pocket, and built in Reading list in Safari. Those are big three that come to mind. I’ve been using such a service for a quite some time, going from Pocket to Instapaper and back a couple of times.

Last one, was when GDPR came into action, Instapaper just wasn’t working for European users. Such a negligence was unbelievable. Stories and information about GDPR were all over the Internet for a long time and not such a small company, that owns Instapaper couldn’t figure it out. So I’ve migrated all of the saved articles and videos to the Pocket and deleted my account. 

But that’s not the point of the story. The point is – when I open my list, I feel overwhelmed, there are tons of articles saved, some from the beginning of 2018. That got me thinking – what is the chance, that I will read the article or watch the video I’ve saved so long ago. I’ve lost the context of some of those articles. Surely there was a thought that went through when I’ve saved it, but I probably won’t remember it now. Nevertheless, I don’t delete such old items, I keep them with hope that some day I will have time to go through all of them. 

As you can guess, that will probably never happen. So I’ve decided to change my mind around it a bit. Now I look at my Pocket queue as an infinite source of articles and videos. Some of them short, some long – depending on the amount of time I have. Right now I can only hope that some day I will read and watch them all, but realistically speaking, I don’t see it happening any time soon.

Leaky culture – Pixel 4

June 14, 2019
2 min read

As the announcement date comes closer, for quite some time, there were a couple of leaks of the new Google Pixel phone. Considering how things are going for a couple of years – nothing new here. There are leaks of pretty much every noticeable hardware well before the announcement. The production chain is so big it’s hard to keep something secret. On some point or another somebody will provide press with a photo, case or sometimes even device.

What’s surprising about this story is companies tweet on June 12th. Google provided photo of the device.

I still can’t wrap my head around this decision. At first, considering, the amount of leaks this made sense. It’s fun, it got a lot of press and device is already out there, so why not use it as an advantage. But then I’ve thought some more and decided I don’t like this move.

First, I don’t like leaks. That’s why I try to ignore it on Twitter, don’t open links if they are about unreleased product. I still like to be surprised. When Apple announces a new device, I want to see it first there, with the intended reveal.

So second comes right out of the first, if someone like me wasn’t following along all the leaks – why spoil the surprise? Now I’m sure what it will look like, we all now how new Android looks, because of the betas. So there is not much left there to announce.

Regarding the phone itself, the only notable thing is – two cameras and a camera bump. Why it’s something of notice? First, Google made of fun of Apple that they removed headphone jack from their phones, two years later it was gone from Pixel. Then they’ve took pride of how there was no camera bump and you could do all the effects with just one camera – seems they’ve changed their mind about that also.

Hope there are some software surprises left for the announcement as hardware seems like “announced” already.

Playdate

June 13, 2019
2 min read

One day in May, I opened Twitter and everyone was talking about one thing only. Surprisingly it wasn’t another story about Trump, it was an announcement for completely new game console. I’ve checked the calendar, yeap, it’s still 2019 and yet here we are.

I was pretty late to the Mac party, when I got my first Apple computer, so I’m not personally amazed by the Panic (company behind Playdate), but I’ve heard a lot about it. Considering I follow mostly Apple enthusiasts on Twitter, I see that name mentioned often. I also haven’t played Firewatch, their video game, but heard only nice things about it.

But after looking at the device, I knew that it’s something I would like to buy. And I could see why everyone was so excited about it. Nowadays nobody launches a new platform for video games. Even some old ones struggle to compete in the market. So one thing that’s going for the developers is the desire to support something new and fun.

Another reason why I think people love this new device – they are tired of huge corporations sucking all of our data, of games consisting mostly from lootboxes and monetization. They want something simple, pay the fair price and get a couple of fun games. That’s all. No paying to get to the next level faster or to get another try. Just plain old game. 

The device itself is very simple, but very attractive. It has black-and-white screen, but also the best connectivity options there are – Wi-Fi, Bluetooth and USB-C. There is also the crank, which is used for some game mechanics, which is very interesting to see.

We still don’t know a lot about the games, but I’ve already signed up for the e-mail, so when it comes out, I sure want to get one. Hopefully they will ship to Latvia.