Want China Times, Staff Reporter 2013-09-29
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| Tencent's stock price on the Hong Kong Hang Seng Index, Sept. 16. (Photo/CNS) |
The
popularity of Alipay — a leading third-party online payment arm of China's
e-commerce giant Alibaba Group — shows that Alibaba is able to attract
customers, but Alibaba has yet to profit from the venture. Other e-commerce
giants have begun to join Alibaba in offering banking services, but insiders
wonder if they can be competitive, the Guangzhou-based 21st Century Business
Review reports.
Tencent
Holdings — China's largest internet company by revenue — is applying for a
private bank licence, boosting its market value above US$100 billion and
approaching the market value of Facebook. Meanwhile, the share prices of Suning
Commerce, a leading home appliance retailer in China, doubled after the
regulator approved its application to set up its private bank, Suning Bank.
An insider
said that e-commerce giants' penetrating the banking industry is enriching the
financial ecosystem, as most people are unsatisfied with the current banking
industry, while Alibaba founder Jack Ma said that "If banks don't change,
we'll change banks." E-commerce giants can use their huge information
flows to complete the transfers of fund flows, Alipay for example collected 50
billion yuan (US$8.2 billion) in just several days. Such moves have shown the
power of e-commerce giants, especially their channel value.
However,
being a bank is not that easy, the insider said. The most important function of
the banking industry is to solicit depositors and lenders, as well as the risk
exposure in the course of the interest rate spread. The challenge for Alibaba
and other e-commerce giants in becoming a bank is how to efficiently lend out
the money they obtain. Alibaba is likely to lend the money to small clients on
its e-commerce platform Taobao, but their lending costs will be higher than the
average standard of banks.
So far
there is also no evidence to prove that e-commerce giants such as Alibaba can
obtain funds with very low costs. If Alibaba really establishes its network
bank, one of the first questions will be how it will establish its own risk
capability.
The four
major banks are guaranteed by Beijing. Although the government has yet to
implement the "deposit insurance system," the general public can be
reassured that the banks will not go bankrupt, but the same cannot be said for
e-commerce banks, the paper said.
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