A new breed of online banks promoted by tech companies like Alibaba and Tencent is taking root. Will they be able to hold their own against traditional banks?
To boost the economy and help small and medium enterprises get capital more easily, the Chinese government is encouraging non-government entities to invest in financial institutions, even allowing private companies to open their own banks. When the government announced its decision to grant five banking licenses for private banks earlier this year, the big three tech companies—Tencent, Alibaba and Baidu—jumped at the opportunity. Tencent, the company behind the popular WeChat social media app, was the first to take the plunge. In 18th January 2015 it launched WeBank, the country’s first online-only bank. WeBank is mainly in the business of selling financial products for other institutions, granting small personal loans and auto loans. Despite the fact that it does not have any brick-and-mortar branches, by July 2015, WeBank had disbursed over RMB 800 million in “personal micro loans”.