Alibaba launches online bank: ‘It’s for the little guys, not the rich’

Alibaba and its affiliate firm Ant Financial this afternoon launched MyBank, a new online bank for China. The new bank is “not for the rich, but for the little guys,” said executive chairman Eric Jing.

It’s the latest and boldest move into personal finance by Alibaba, which is China’s biggest ecommerce company. It comes two years after it rolled out a personal wealth fund called Yu’e’bao.

With Yu’e’bao focusing on savings – promising higher interest rates than offered by China’s state-dominated banks – Mybank will concentrate on loans. Alibaba said today that Mybank is “dedicated to provide inclusive and innovative financial solutions for individuals in both urban and rural areas and small and micro enterprises.”

Challenging startups too

Mybank will offer loans up to RMB 5 million (around US$800,000). It also promises to offer smaller loans than regular banks normally would. That’s because Mybank’s “cloud-based model requires much lower operational costs than the traditional brick-and-mortar banking model,” explained Jing.

Alibaba founder and chairman Jack Ma, pictured earlier today

This pitches Mybank up against not only China’s banks, but also a wave of Chinese startups that offer peer-to-peer (P2P) loans – startups that also target people or loan sizes that are not well served by major banks. These startups include Xiaomi-backed Jimubox and Softbank-funded Edai, though a duo named Dianrong and Renrendai seem to be the largest in this booming segment.

Alibaba’s online bank also puts it up against Tencent’s WeBank, which launched in January.

Mybank is backed by RMB 4 billion (US$646.3 million) in capital, Alibaba explained today, and already employs 300 people. With no physical branches, the new business will save significantly on operational costs.

Alibaba first experimented with finance back in 2010 when it launched Ant Micro Loan, which focused on small businesses as well as merchants on Alibaba’s shopping marketplaces, Taobao and Tmall. That scheme has lent to over 1.6 million small and micro enterprises and entrepreneurs.