Blair Zhou, 26, uses Alipay on a daily basis, spending at least 2,500 yuan a month with the third-party payments platform on everything from transportation to dinner.
"Young people rarely put much cash in their purse now. A mobile phone with Alipay is enough," she said.
What makes using Alipay even more convenient is Zhou's relatively high Sesame Credit score — 775 out of a possible 950 — that allows her to access a host of privileges unavailable to those with lower scores.
Sesame Credit, a credit-scoring service from Alibaba (BABA) affiliate Ant Financial, attributes scores to Alipay users who have opted into the program. Users with higher scores are able to access benefits that run the gamut from waivers on car rental deposits to expedited airport security checks.
Sesame Credit is just one of several provincial-level or private pilot programs in China's push to develop a nationwide social credit system — even as experts warn of data privacy and transparency concerns. The current implementations are currently unconnected, but may ultimately be combined under government leadership.
Part financial credibility indicator and part compliance mechanism, the social credit system aims to generate a score for individuals and institutions in China based on data like tax filings and driving demerits. And while consumers may reap rewards, the score also functions as a signal mechanism for authorities about whom or what deserves to be penalized.
Carrots and sticks 2.0
Beyond Sesame Credit's reward offerings, public social credit systems offer good-behavior benefits that can be minor conveniences like enhanced borrowing privileges at a local library, or free loaner umbrellas. But rewards can also have greater financial significance like expediting loan application approvals.
Conversely, poor scores result in penalties enforced against individuals or organizations that have committed wrongdoings — like traffic violations or late bill payments.
And those rules are not just hypothetical. Parts of the social credit mechanism have already been put into practice, according to Rogier Creemers, a researcher specializing in Chinese law and governance at the Van Vollenhoven Institute at Leiden University.
"When rules are broken and not rectified in time, you are entered in a list of 'people subject to enforcement for trust breaking' and you are denied access from things. Rules broken can lead to companies being unable to issue corporate bonds or individuals not being allowed to become company directors," Creemers said.
According to a document released by China's State Council, "trust-breakers" can face penalties on subsidies, career progression, asset ownership and the ability to receive honorary titles from the Chinese government.
In a similar vein, those who fail to repay debts are punished by travel restrictions. Just last month, the Supreme People's Court announced that 6.15 million people in the country had been banned from air travel over the last four years for defaulting on court orders, according to local media.
The Financial Times reported that some 6.73 million people were on a blacklist that had been in use by the court since 2013. To enforce penalties, the court announced it was working with a total of 44 government institutions to ensure that those blacklisted would be "limit(ed) … on multiple levels."
While inconveniencing some, the social credit system will likely bring about benefits to the Chinese financial system.
A substantial proportion of China's population remains unbanked and parts of the economy are largely cash-based: Some 21 percent of the population did not have an account at a financial institution in 2014, according to the World Bank. A social credit regime could strengthen the credibility of the Chinese financial system by enforcing legal compliance and ultimately, building trust in the marketplace.
Importantly, the system does not just ensure that individuals follow the rules, it also ensures that government officials and institutions are held accountable to the law, Creemers said.
Despite that, backlash to the social credit system has been fierce with many Western media outlets highlighting the dystopian-sounding nature of the state taking a role in monitoring and policing citizen behavior. In response, state-run tabloid Global Times ran an op-ed that the system "won't be Orwellian" and such an interpretation by the West was "warped."
Establishing a 'sincerity culture'
For all its authoritarian overtones, the original rationale for creating the social credit system was considerably more benign.
"As far back as 2004, there was mention of some system to respond to the lack of compliance in the market economy. The market economy brings about particular pathologies, such as people not paying their bills, companies committing fraud or the sale of substandard products," Creemers told CNBC in an interview.
It was only later in a 2014 State Council document that the idea of scoring or measuring people as a tool for stimulating legal compliance arose.
"China has huge problems with legal compliance so the regime conclusion was that since existing methods of generating compliance were not sufficient, they would step up their game with extra punishment," Creemers explained. "The system merely uses information the government already has on its citizens in a more coercive way."
While the actual workings behind the development of the system remain opaque, the idea of building trust is a common thread that runs through planning reports on social credit across multiple government agencies. The State Council, effectively China's cabinet, described social credit as an "important component of the socialist market economy system … (for) establishing the idea of a sincerity culture" in a planning outline published in 2014. It said this was necessary so that "the honest mentality and credit levels of the entire society" could be raised.
Likewise, the National Development and Reform Commission (NDRC), an agency tasked with overseeing economic and social policy, echoed similar sentiments in its 13th Five Year Plan. In it, the NDRC stated that the development of "credibility systems" was needed to increase "integrity in all areas of society."
State media has also echoed reassurance that the social credit system was being developed to nurture a business environment where fraud, counterfeiting and intellectual property theft would be more efficiently tackled. Still, local news agency Xinhua ultimately acknowledged that given how "credit reward and punishment initiatives" were being implemented differently across cities, the social credit system lacked sufficient regulation.
The most commonly cited public sector pilot program is the one carried out in Suining, a county located in the Jiangsu province. In the trial, local authorities used information they already possessed, such as tax and criminal records, to assign scores to people. Citizens were then categorized according to one of four letter grades (A-D) based on their scores.
They were correspondingly rewarded or penalized.
After the project met with domestic backlash, local authorities adapted the system by removing the letter grade classification. The social credit scores, however, continue to be recorded, according to the Washington Post.
Businesses are just as involved in driving the system forward, even though it's often framed as a government-led initiative, Shazeda Ahmed, a doctoral candidate at Berkeley, told CNBC.
In her research, Ahmed, who specializes in Chinese internet policy, focused on Alipay's use of Sesame Credit. Both Alipay and Sesame Credit are run by Ant Financial, which is one of eight companies approved by authorities for social credit experimentation in the private sector.
Sesame Credit gives users a score based on five dimensions of information: personal information, payment ability, credit history, social networks and behaviors. Some are more objective than others.
Here's an example of what a Sesame Credit score page looks like:
The private sector has an interest in encouraging rule compliance, she said, because social credit programs could encourage more consumerism.
That result works on two levels. Firstly, social credit serves as a means of allaying purchasing fears since "trust-breakers" would be removed from the marketplace thanks to penalty mechanisms. That's pertinent given China's patchy history of legal compliance, which has seen luxury goods and even baby formula counterfeited.
The rewards mechanism in the social credit system could also generate higher levels of consumption, Ahmed said. While researching online reactions to Sesame Credit, she said she found plenty of buzz suggesting that users can increase their scores by spending more via Alipay. Online news platform Quartz reported in 2015 that Sesame Credit did not take into account what users purchased, but the amount of purchases affected scores.
A spokeswoman from Ant Financial told CNBC that at present, the amount spent by Alipay users did not affect their corresponding Sesame Credit scores as much as their ability to "fulfill promises in a commercial context." As the scores are holistic in nature, the ability and willingness of users to repay debts had greater significance, she added.
Sesame Credit also maintained that user and data privacy remain of utmost importance to the company. "Sesame Credit only tracks consumption-related activities of users who have signed off to join (the service)," the company told CNBC in an email.
While it declined to disclose the number of Alipay users who had activated Sesame Credit, Ant Financial claimed it maintained strict measures to ensure a "financial level" of data security to prevent potential leaks, saying that 30 percent of Ant Financial staff are devoted to security-related work.
For now, it remains unclear how exactly scores are calculated because algorithms used by Sesame Credit are blackboxed. Unlike Alibaba, Ant Financial is not a public company and as a result, has not come under the same level of scrutiny, Ahmed said. As such, information disclosed on Sesame Credit and the way it might be developed in the future has been relatively vague.
FICO and then some
Given its potentially dystopic proposition, reactions to the social credit system have varied.
"From what has been outlined in the official sources, there is nothing more intrusive than what is commonly done in the West," said Forrest Zhang, a sociology professor at the Singapore Management University.
Other experts disagreed, arguing that the social credit system had broader objectives than simply assessing creditworthiness. FICO is only concerned with financial solvency, Creemers said, whereas "the social credit system tries to affect regulatory compliance."
A bigger issue could be that the social credit system could fail to address the very problem it was created to tackle. The system was built on the idea that the more known about individuals, the easier governing becomes, but Creemers suggested it could actually be more difficult to assess what a single score stands for when it encompasses such a wide scope of data.
Ahmed, the doctoral candidate at Berkeley, said social credit relied on input that was too loosely-defined, which could result in "culturally specific restrictions" baked into the system.
This in turn could have a major impact on civil liberties, she said, as people pile into a wide-reaching system that influences everything from ability to travel to career prospects.
In spite of the ongoing debate concerning data privacy, netizens in China appear to have taken the system's kinks in stride. A scan of Chinese social media site Weibo reflected that the most popular discussions about Sesame Credit involved people brainstorming how scores could be used to improve a shared bicycle scheme.
Zhou, the frequent Alipay user, put it this way: "I think it's a great service … To generate a direct credit score can produce lots of value in different areas, like borrowing money on certain days interest free (and) applying for credit cards."