Online and onward
Internet-based banks are stumbling but holding fast to a vision of bright future
In November, China’s Internet search giant Baidu Inc and China CITIC Bank Corp Ltd, a mid-sized lender, announced they will launch as yet unnamed direct bank that will have no network of branches but will offer its services online.
By foraying into Internetbased banking, Baidu emulated another two Chinese Internet giants: Tencent Holdings Ltd and Alibaba GroupHolding Ltd.
Robin Li, chairman and chief executive officer of Baidu, noted the proposed direct bank will be the first of its kind, in the sense that it will bind an existing bank and an Internet company from the mainstream together in cyberspace.
“The Chinese banking sector has arrived at a historical juncture and will be vitalized by the Internet.”
China CITIC Bank said it could make a transition by drawing on the operation model of Baidu and their cooperation will likely bring a large number of clients and increase online traffic to the proposed bank.
For example, Baidu could crunch big data about its users to create profiles of potential direct bank customers.
Such a strategy would be in tune with Chinese Premier Li Keqiang’s “Internet Plus” plan, which underlines boosting economic development through Internet technologies like cloud computing and big data analytics.
It is a plan that is inspiring a growing number of Internet companies to innovate and launch online financial services.
For instance, WeBank, the country’s first online private bank, was jointly founded by Tencent and two local investment firms in December 2014.
By October-end, WeBank’s outstanding loans exceeded 4 billion yuan ($624 million), benefiting more than 10 million people. The bank sold third-party wealth management products worth 70 billion yuan to nearly 500,000 clients.
At present, WeBank’s financial products span a small range that includes securities investment funds, third-party asset management products and small personal loans to invited clients.
Similarly, online lender MYbank provides loans of up to 1 million yuan without collateral to small offline merchants based on their creditworthiness. It also offers unsecured loans of no more than 500,000 yuan to farmers and small business owners in rural areas.
MYbank opened for business in June. It is led by the financial services affiliate of Alibaba Group Holding Ltd, China’s largest e-commerce company.
Yu Shengfa, president of MYbank, told the media in October that the bank was still testing application software and invited 500,000 small and micro entrepreneurs to use its application.
Even traditional banks are seeking to revitalize themselves by adopting online technologies and innovative business models even though some newly established Internet-based banks are facing challenges.
WeBank blames regulatory hurdles for its modest success so far.
Under the current regulations, people seeking to open newbank accounts are required to visit the bank with their identification card and sign related forms. For accounts with online banks, they need to use a debit card issued by a traditional bank, due to safety concerns. Online banks feel this rule ensures the banking space is not a level playing field.
Li Nanqing, president of WeBank, said he hopes remote opening of online bank accounts would be allowed as soon as possible.
A visitor tries face-identification technology at the booth of Ant Financial, Alibaba's finance affiliate, during an industry expo in Hangzhou, capital of Zhejiang province.