Baidu Buys Into U.S. Fintech Startup ZestFinance

21 Jul

Baidu, China’s leading search engine, has jumped onto the global bandwagon of Fintech, announcing on July 18 investment in U.S. Fintech startup ZestFinance.

Via the investment, Baidu will be able to apply ZestFinance’s technology in machine learning and big data in analyzing the credit standing of its subscribers, as a major reference in screening their loan applications. Baidu is the second Chinese firm buying into ZestFinance, following investment by JD.com, an e-commerce operator, in 2015. Investment scales of both have not been disclosed. In addition, JD.com and ZestFinance have set up a joint venture JD-ZestfinanceGaia.

Up to now, ZestFinance has received injection of US$270 million fund.

ZestFinance came into being in 2013, offering credit-rating service to financial institutions. Thanks to big-data technology, it helps financial institutions more precisely gauge the credit standing of loaners, before determining the size, timing, and related conditions for loans, thereby lowering risk. It was founded jointly by Douglas Merril, former vice president for engineering at Google, and Shawn Budde, former ranking manager at unsecured-loan department of Capital One.

Different from traditional practice of financial institutions using some 10-15 simple statistics for credit rating, ZestFinance embraces tens of thousands of statistics in evaluating the repayment capability of loaners within several seconds. Merril pointed to tremendous potential for ZestFinance’s service in China, citing low penetration rate of credit cards, at only 20%, and lack of centralized credit-information institutions to assist financial institutions in evaluating the credit standing of loaners, unlike the situation in the U.S.

Moreover, said Merril, Baidu can apply ZestFinance’s technology in determining the credit status of its subscribers, concluding, for instance, a person may be jobless, as well as non-student, from his/her habit of searching online video games during workdays. Merril noted that the rating technology, though not perfect, will be able to prove valuable references to Chinese financial institutions, in view of scarcity of financial statistics in the nation.