Data companies in China feeling the heat

Déjà-vu

And in the recent crack down of illegal online cash loan, some data companies are feeling the heat.

A few days before the Mid autumn and National Day holidays, almost every day you see news of companies being searched by police, whole data teams being detained, or founders of some famous companies going overseas to “avoid unintended consequences”.

This seems to me like Déjà-vu of the ICO crackdown about two years ago.

Because of the ongoing trade war, China has to ensure that there is abundant credit in the market to fuel consumption. But at the same time, some of the aggressive interest and collection practices have the risk of destabilising certain segments of the society.

This year, after a number of attempts to arrest such practices, the authorities are finally going after those who sell the shovels: customer lead generation companies, data companies, payment aggregators, and collection service companies.

“Natural” selection

For many such data service providers, the core team would acquire data from legal means, analyse and process these data to help their clients better manage their risk.

However, you can only do as much with legally obtained data. Many data companies would set up separate teams to complement that.

Some of the common practices of these teams are: Crawling personal information without authorisation, illegal access to person accounts, buy personal information from the black market.

As mentioned above, many of these activities are either in the grey area or outright illegal.

However, if illegal practices are not stopped by the authorities, purely legal players will soon become disadvantaged. They would either also start illegal practices, or see their business dwindle.

Not much choice.

Let’s see if the current wave of crackdowns actually changes this dynamic.