Chinese Tech Giants Challenge Traditional Banks
Traditional banking in China is challenged by online banks backed by internet firms in terms of asset growth, balance sheet performance and non-performing loans. Internet firms in Asia like tech giants Alibaba and Tencent uses their advantage in user services as they integrate banking services in their user's regular online activities.
The assets of WeBank, a Tencent-backed online bank, increased by 169 percent more compared to the start of last year. It surpassed the RMB 200 billion thresholds after gaining RMB 220 billion at the end of 2018.
The trend of investments from tech firms followed the investments of Alibaba and Tencent in China. Tech companies, that offers messaging, online holiday bookings, and other online transactions, invested into banking as regulators across Asia allowed their banks to accept the digital players into the industry.
The integration of tech companies in the banking industry moved at a fast pace unlike in Europe and in North America where new businesses are backed by venture capital funds and financial sector incumbents.
WeBank's latest financial report said that its managed loan balance reached over RMB 300 billion and its balance sheet loan balance increased by 151 percent at RMB 119.8 billion compared to the start of 2018. The company also reported that its borrowers exceeded 100 million.
Tech companies in Asia grabbed the opportunity provided by their platforms in integrating with mobile banking. The companies incorporated banking services in the daily activities of their users and they used the efficiency of their technology to cater to the service.
Wayne Xu, president of ZhongAn International, a unit of Chinese online insurer Zhong An, noted that if you want to open a bank account in Hong Kong you need to go to a branch, answer questions for an hour, and you still won't get the account opened without follow up calls. He added that all the information needed at the counter can already be collected on a mobile phone.
Maybank, another online bank, saw an increase in operating revenue by 47 percent year-on-year in 2018 as it reaches RMB 6.28 billion. MyBank reported that it provides financial services to 12 million micro and small by extending their focus on rural village market.
Last month Hong Kong's regulators issued one of four virtual licenses to ZhongAn and they are also planning to grant the remaining three to the other applicants. In 2017, South Korea issued two online-only bank license to two companies. One of the companies is Kakao Bank which operated behind South Korea's largest chat app.