What You Need to Know for Creating Credit in the Internet Age When Personal Information Is Readily Accessible

Lately, the Internet of Things (IoT), which connects things directly without the aid of human hands, has become a big topic of conversation. Meanwhile, creating credit through the Internet, which connects people, is viewed to drastically transform the existing economic system.
In this article, the former Vice Chairperson of Fujitsu introduces the key points of creating credit in the age of the Internet

Author Profile
Chiaki Ito
Former Representative Director and Vice Chairman, Fujitsu Limited; Former Representative Director and Chairman, Fujitsu Research Institute.
Outside Director of Hitachi Zosen Corporation, Zensho Holdings Co., Ltd., and Obic Business Consultants, Co., Ltd.

* This article was published in Chisounomori 2017, Volume 3 (pp. 19-22).
Affiliations and titles are as of March 27, 2017

Successful Share Business Requires Personal Information-Based Credit

Ridesharing service (unlicensed taxis), which Uber started in Silicon Valley, rapidly spread worldwide. Although Uber is an unlisted company, its market value is estimated to be several times greater than that of JR Central. You no longer see taxi cabs on the streets of Silicon Valley. If you want to ride a taxi today, you have to go to a hotel and ask someone there to call one for you. But, when you think about it, isn't it risky to ride in a stranger's car in the U.S., in a country with high incidence of violent crime where people from different ethnic groups gather from all over the world and are allowed to carry guns? Isn't it risky to give a ride to someone you don't know?

Similar to Uber, Airbnb, which was also founded in Silicon Valley, has become a big threat to the world's hotel industry. Even in Japan, a regulatory backward country where Uber is not yet permitted to operate, Airbnb has said to have already secured over 50,000 rooms in Tokyo. Since the total hotel capacity in Tokyo is approximately 150,000 rooms, Airbnb has had an enormous impact on the industry. And similar to ridesharing, this room-sharing service raises many questions. Isn't it risky to stay at a stranger's house? Isn't it risky to let someone you don't know stay at your house?

Such share businesses are popular in the U.S. and since highly detailed personal information has already accumulated in that society, one can easily determine whether someone is qualified to provide or receive a service by referring to the information and checking his or her personal credit score. In the U.S., it is estimated that personal information of about 90 percent of the entire population is digitized. From the eyes of privacy-weary Japanese, such a society may seem utterly unacceptable.

Even in the U.S., of course, people who do not want their personal information used without permission can ask a court to delete it. However, as soon as the data is deleted, that person will be classified into the group consisting of the other 10 percent of the population--namely illegal immigrants, homeless and criminals--and will no longer be able to do normal, everyday things in American society.

To use Airbnb or Uber, you need to become a member and to do so, you are required to provide quite detailed personal information, such as your name, mailing address, phone number, email address, driver's license number and passport number. According to Airbnb, the company receives many complaints that say: "Why in the world do I have to give you so much information?" Whenever this happens, Airbnb turns down membership applications politely, explaining: "The information is necessary for protecting customer safety. Without this information, we are sorry but we cannot allow you to be a member of Airbnb."

Internet Activity History, Including Social Networking Services, Is Used as Credit Information

Internet activity history is used as credit information. Both Airbnb and Uber ask people who use a service and provide a service to score each other. These scores are added to the credit information. Highly scored service providers increase their business, and highly scored users receive priority service from many service providers. Therefore, all Airbnb users clean the room they stayed in before leaving.

Share business operators like Airbnb and Uber use posts on social media, such as Facebook, as personal credit information. That means you can find out if someone is trustworthy by reading their Facebook posts. Of course, the companies must be using artificial intelligence to go through the massive amount of data. Meanwhile, national security authorities in Europe and the U.S. are said to be able to identify the culprits quickly when a terrorist attack occurs because they continuously monitor social media posts for potential security threats. Social media is a gold mine of personal information.

Many of you may say, "That's why I don't use Facebook or any other social media services." However, if that is the case, you may want to check thoroughly to make sure no one is impersonating you on the Internet. Even if you do not use any social media services, your online purchases are monitored. Your Google and Yahoo! searches are tracked, and if the GPS of your mobile phone is on, your whereabouts are all known. These pieces of data are all added to your credit information. In other words, someone keeps track of all your personal activities in the Internet society. Therefore, it may be more beneficial for you to actively post on social networking services to show that you are living a clean life every day.

Creating Credit through the Internet Spreads from Service to Finance

Companies like Uber and Airbnb are expanding their businesses using the enormous amount of credit information they have accumulated. To expand providing and receiving services among strangers, such as door-to-door delivery, baby-sitting, cleaning and laundry, catering and nursing care, the credit of individual service providers and receivers is critically important. If such individual agents become the mainstream of the service industry, conventional service companies will become inefficient organizations in comparison. That is because personal services cost less and guarantee quality, and workers earn more as their service improves.

The practice of creating credit through the Internet is expanding to other industries. The biggest credit-based industry is finance. Banks, in particular, operate solely on credit. Customers feel safe to entrust their money to banks and let them handle payments. Banks' most important job is to manage the credit of their borrowers. New financial technology, or Fintech for short, has enabled establishing such "credit" on the Internet. A typical example is blockchain technology.

From the beginning, the Internet has been managed by an autonomous decentralized system without an administrator. Once this autonomous decentralized system is enabled to handle credit creation, businesses and individuals who used to rely on banks for making payments can do the transactions themselves without paying fees. Such payment data is the most reliable credit information, and those who have access to the data can expand their business into financing. Apple launched Apple Pay for that reason. Facebook and Google provide free services to individuals not only for advertising business. By quietly monitoring individuals' activities, they accumulate personal credit information, aiming to enter into the financial business. The ultimate goal of Google, Amazon and Facebook is the same: entry into the banking business. I have no doubt that this new way of creating credit through the Internet will lead to disruptive innovation in the world of service and finance.

In the Future, Clients Will Directly Commission Jobs to Individuals, Not Organizations, Who Can Deliver Reliable Value

It is predicted that by 2045, about 30 years from now, artificial intelligence will surpass human ability and about 70 percent of job types will disappear. It is said that the types of jobs requiring higher education will be particularly endangered. I think that full-time corporate workers rather than specific job types will dramatically decrease. I mean, 30 years from now, our work style will change from being employed by a company and doing jobs that our boss assigns to undertaking jobs directly from clients as individual contractors.

At present, many clients ask companies with a trusted brand to do their jobs. The reason being they know well-known companies finish jobs responsibly. However, people who come down with a serious disease look for an acclaimed doctor, not an acclaimed hospital. That is because what is important is not "which hospital to go to" but "which doctor to see." The same principle applies to contracting general jobs.

If clients can refer to individual service providers' past work performance and ratings in addition to credit information like work skills, degree of commitment and personality on the Internet, they will have much more satisfactory results from individuals with outstanding ability than contracting jobs to well-known companies. This is not a futuristic fantasy but an extension of the share business that Uber and Airbnb operate today. That is, many of the existing service companies may face the same fate as the taxi companies Uber has put out of business.

What should your children and grandchildren do to prepare for such a time? There is no guarantee that once you join a good company, you are set for life. Instead you need to think about what you can do to contribute to the society as an individual to earn money. I imagine it is not the kind of thing you can learn at a prestigious university. In the age when credit is actively created through the Internet, what is important may be to cultivate an honest ability to earn a living in day-to-day life.