Democratising finance: Net groups disrupt China’s financial landscape
Date: 2015-02-05 News Sourse: Financial Times
The past year has brought significant disruption to China’s financial landscape, with internet heavyweights Alibaba and Tencent leading the charge into mobile payments, deposit-like savings products, and even fully fledged banking.
Chinese policy makers have said that internet companies can play a positive role in enhancing customer service, spurring innovation and increasing competition in financial services. Competition began in mid-2013 with the launch of Yu’E Bao, an online money-market fund. Run by Alibaba, the financial services affiliate of ecommerce group, the fund offers cash on demand but also provides higher interest rates than those available on bank deposits.
Assets under management at Yu’E Bao reached Rmb599bn ($96bn) by the end of 2014, making it China’s largest money-market fund. Tencent Holdings, the gaming and social networking group, and Baidu Inc, the search provider, have also launched similar products. In addition to higher yields, the money-market products have lured depositors away from traditional banks by integrating them with these companies’ mobile-payment services.
Customers can use their Yu’E Bao credit to make purchases on Alibaba’s Taobao and Tmall ecommerce platforms, as well as for paying credit card and utility bills. Alipay, Alibaba’s mobile-payment service, is also increasingly accepted at food shops.
Last year, taxi-hailing apps became the locus of a fierce battle for mobile-payments market share. Alibaba-backed Kuaidi Dache has vied with Tencent-backed Didi Dache for pole position. Meanwhile, Baidu haspurchased a stake in US car-hailing company Uber.
Meanwhile, Tencent, which until recently had a minimal presence in ecommerce, has enhanced its popular WeChat instant messaging app to allow brands to sell products directly through their WeChat accounts, with payments processed by Tenpay.
The final frontier is banking. China’s banking regulators last year approved 10 privately owned companies, including Alibaba and Tencent, to establish regional banks.
A joint venture led by Tencent this month became thefirst bank to start operations under the pilot. Premier Li Keqiang attended the opening ceremony for WeBank, named after WeChat.
Alibaba will partner with Fosun International, one of China’s largest private conglomerates, to form Zhejiang Internet Commerce Bank this year. Other companies including an airline, a pharmaceuticals producer and an auto-parts manufacturer are also participating in the pilot project.