Earlier today an Allibaba affiliate company announced it received permission from government regulators to open a private bank. The approval marks the latest benchmark Alibaba has passed as it continues to enter China’s banking industry.
According to a post on Alibaba’s official Alizila blog, Zhejiang Ant Small & Micro Services Group will own a 30 percent stake in what the company describes as an “internet-based commercial bank” that will serve consumers and small businesses. The post also cites Zhejiang Ant vice president Yu Shengfu as stating that the bank will make small loans of under RMB 5 million (about US$810,000).
Our readers probably aren’t familiar with Zhejiang Ant Small & Micro Services Group, but they’re probably familiar with the product it controls – Alipay, the giant escrow payment processor that grew out of Alibaba’s ecommerce sites. Zhejiang also shares its profits with Alibaba and is controlled by Alibaba founder Jack Ma. So while legal documentation might downplay Alibaba’s connection to this bank in question, in practice, this looks to be the beginnings of an “Alibaba bank.”
Ma has gone on the record several times proclaiming his dissatisfaction with China’s banking sector. In July 2013, The Wall Street Journal pointed to an interview Ma held with domestic paper People’s Daily in which the Alibaba chairman decried China’s banks for only serving the “top 20 percent” of their clients. In addition to Alipay, Alibaba also maintains an affiliation with (read: “owns”) Yu’ebao, a money market fund that lets Chinese consumers earn interest on money stored inside their Alipay accounts. By the end of June 2014, the fund ammassed more than US$92 billion in assets under management (AUM).
See: Wallet wars: A peek inside China’s PayPal
What might an “Alibaba bank” look like? It’s too early to make predictions, especially since Zhejiang Ant will still have to jump through a few more regulatory hoops before it gets the official green light to operate. However, given how Alibaba’s bread and butter comes from small businesses that sell goods online, expect loans to these businesses to make up a key component.
Alibaba isn’t the only tech giant looking to get in on consumer finance. Tencent received approval to open a private bank back in July.
Editing by Terence Lee
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