Alibaba’s digital bank comes online to serve ‘the little guys’ in China

You may know Alibaba for its huge e-commerce business in China and the record-breaking U.S. IPO that it held last year. But there’s a lot more to the Hangzhou-based company than that, and as of this week, that includes an online bank.

Alibaba-backed MYbank opened Thursday with a promise to provide services “for the little guys.” The service is an all-digital bank, it has no physical branches but is open 24/7. It is aimed at those who tend to end up a little short changed by the existing banking system — SMEs who struggle to fit into a financial bracket for loans and services, and those in rural areas who have issues accessing branches and banks in person.

“Answering to the needs of those who have limited access to financial services in China is our mission,” said Eric Jing, president of Ant Financial — the Alibaba affiliate backing the bank.

“MYbank is here to give affordable loans for small and micro enterprises, and we are here to provide banking services, not for the rich, but for the little guys,” Jing, who is also executive chairman of MYbank, added.

Alibaba isn’t the only Chinese internet firm moving into banking. Tencent, the creator of smash-hit chat app WeChat, began piloting WeBank, which was China’s first digital bank, in January of this year.

According to The Wall Street Journal, both MYbank and WeBank have said they intend to help meet that demand by operating without brick-and-mortar branches to keep costs low and reach more users. MYbank has only 300 employees, allowing it to keep personnel costs low and invest more in other areas. Ant Financial, which operates Alipay—China’s biggest online payment system that processes most of Alibaba’s e-commerce transactions—said access to a large amount of online data can enable MYbank to determine the borrowers’ creditworthiness and lending risks.

But questions remain about the feasibility of an online-only business model for Chinese banking,  Financial Times writes. Current regulations require customers to appear in person at a bank service counter to open an account. In March, however, 21st Century Business Herald reported that the Chinese central bank was drafting new rules that would allow for online-only account openings. Large banks are advocating stricter rules, while smaller banks, as well as online players, want a looser regime, the paper reported.
Mr Jing quoted by FT said the company’s facial recognition technology, which could allow for identity verification via the internet, is “very mature”, although he was unsure when or if regulators would approve its use.