Alibaba’s Affiliate Finance Business Launches Online Bank

The finance arm of Alibaba has launched an online bank, which aims to utilize the company’s customer data to supply finances to small businesses.

The owner of MyBank, the above-mentioned online bank, is Zhejiang Ant Small & Micro Financial Services Group, an affiliate financial business belonging to Alibaba. It is one of the holders of six banking licenses that China had granted to private companies in a bid to diversify its financial system.

MyBank will greatly benefit smaller companies that find it difficult to obtain loans from banks owned by the state, which favor major companies owned by the state. Eric Jing, the executive chairman of MyBank, said:

Answering to the needs of those who have limited access to financial services in China is our mission. 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.

In January, WeBank, an online lender, was launched. WeBank is a joint venture owned by social media and online gambling company Tencent, one of Alibaba’s rivals.

However, the Chinese banking system may not be compatible with online lending businesses. According to the current laws, customers have to visit a bank to open accounts. However, a 21st Century Business Herald report of March stated that the central bank of China was drafting a new set of regulations to permit customers to open accounts online. Larger banks, however, are in support of stricter rules while online players and smaller banks are in favor of relaxed rules.

Eric Jing says that the company has implemented facial recognition technology, which enables customer identification online. Referring to the technology as “very mature,” he said that he did not know when it will get the regulators’ approval.

He also said that deposit taking is not that important anymore as Chinese regulators are on the verge of cancelling the maximum loan-to-deposit ratio of 75%, which would have made the opening of deposit accounts essential for lending. He said: “We haven’t considered deposits, and we’re not going to chase deposits” adding that MyBank will depend on interbank finance markets for its lending.

Alipay, an online payment processor similar to PayPal, and Yu’E Bao, the biggest money market fund in China, is also under the control of Ant Financial

Fosun International, one of the biggest private conglomerates in China, and many other smaller partners have also invested in MyBank.