FICO hosted a gathering of 30+ senior risk officers from banks in China and other Asia Pacific countries.  One of the take-aways from the gathering was that bankers are carefully watching where world economic events are headed.  The theme of uncertainty prevails, as it does in boardrooms in more troubled regions like the U.S. and Europe.   Over 72% felt that the global influence of Chinese consumers has either overtaken that of U.S. consumers or will do so within 5-10 years.   This is hardly surprising simply because of the number of people involved.

The good news is that Chinese banks, and many others in Asia Pacific, are still focused on growth. However, growing concerns about the consumer make the path to growth more challenging.   In the depths of the financial crisis, banks in many countries stuck by an easy credit policy – just say no. However, if you want more growth, more subtlety is required.   Many of the region’s banks express an ardent desire to try to understand the complete customer.

A better understanding of existing customers goes right to the heart of the indebtedness question. Full-service retail banks have a sort of advantage if they can effectively interpret the information they get from both card and deposit-based products.   This is especially important in a region like Asia Pacific, where there is a lack of reliable central data or credit bureau.

There is one encouraging aspect:  APAC banks understand the need to adapt faster and smarter. They’re generally not encumbered by legacy systems and decades-old culture and habits.  China and other growing countries are in the midst of change – making it happen is now the new normal.

FICO:  Banking Analytics Blog

BIIA commentary:  Credit bureaus are being established in Asia, a development which started after the Asian financial crisis in the late 1990s.  However some of these credit bureaus have yet to develop critical mass. 
In China the situation is particularly precarious with the regulator operating a state monopoly for consumer credit reporting.   The private sector is not permitted to participate,  thus the lack of competition may retard the effectiveness of consumer credit reporting. 
India restricts foreign ownership in consumer credit bureaus to 49% which takes away the incentive for foreign investors.  It is interesting to note that most of the world’s customer data management function is outsourced to Indian companies, yet foreign companies in India are not permitted to manage data on Indian subjects in India. 
Indonesia attempted to create a state owned credit bureau with mixed results.  After 10 years of experimentation a private sector solution may be in the cards.   Australia is still struggling to introducing positive reporting, which is supposed to happen in 2012, but seems to be delayed until 2013.   
The countries which appear way ahead of the game are South Korea, Taiwan, Hong Kong, Singapore and Thailand.  All of which have a significant head start in establishing credit bureaus.