Baidu invests in ZestFinance, to aid credit scoring in China

California-based fintech firm, ZestFinance that offers machine learning and data science for credit-scoring claims to have secured a strategic investment from Chinese web services company, Baidu, for an undisclosed amount. As a part of the investment Baidu will leverage ZestFinance’s underwriting technology for Baidu’s search, location, and payment data in order to improve credit scoring decisions in China. The joint effort by data scientists from both will aim to gather accurate credit scores of potential borrowers. Founded by Douglas Merrill, former CIO at Google, ZestFinance is a tech platform that claims to apply Google-like math to credit decisions. It consumes vast amounts of data to identify ideal borrowers, enabling higher repayment rates for lenders and lower-cost credit for consumers. With Baidu’s search history, loan underwriting and assessing credit risk should be easier, hopes ZestFinance. Also, it may potentially help Zest create a consumer credit history in China, which is still devoid of centralized credit bureaus. The company at the preset, offers a loan service, dubbed, Basix that loans to middle-class Americans whose credit scores won’t allow them to qualify for a bank loan. Douglas Merrill, Founder and CEO of ZestFinance, Said:

At ZestFinance, our mission is to make fair and transparent credit available to everyone. This investment from Baidu will help further our mission, particularly in the fast-growing Chinese credit market. We’re thrilled to work with Baidu to turn search data into credit data.

In another statement, he stated, “While many lenders take hours, or even days, to make credit decisions, we make them accurately in less than 10 seconds.” According to the claims, the technology analyzes tens of thousands of data points to effectively evaluate creditworthiness. ZestFinance’s big data analysis approach claims to consider information that traditional underwriting methods do not such as anonymized consumers’ online shopping habits. This technology will possibly enable lenders in China to predict risk and ultimately expand Chinese consumers’ access to fair credit. While Baidu eyes to develop a credit scoring platform, based on its search data, China, at the same time could use some help in streamlining its traditional credit systems. However, it is not the first of its kind funding from China, earlier direct-sales company, JD.com partnered and invested an undisclosed amount in ZestFinance to expand customer credit. Tony Yip, Global Head of Investment, Mergers and Acquisitions, Baidu, said:

ZestFinance’s unique ability to analyze and process complex, disparate data to make accurate credit decisions is very valuable to the Chinese credit market, where a centralized credit scoring system has yet to emerge. ZestFinance will be an important technology partner for Baidu going forward, and we look forward to working together to help transform the financial services market in China.

ZestFinance came into being in the year 2009 and since has participated in 7 rounds of funding from investors. According to ZestFinance, it has raised $262 million in total. Earlier in October 6, 2015, it had raised $150 million in a debt financing deal from Fortress Investment Group.