Want China Times, Xinhua 2014-01-10
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| A user's account webpage displays his Yu'E Bao account profit. (Photo/CNS) |
A rush by
China's big internet companies such as Alibaba and Baidu into online finance in
the second half of 2013 is altering the landscape of China's financial sector
in a dramatic and unprecedented way, industry insiders have said.
Last year
was widely seen as "ground zero for Chinese Internet finance," partly
because of the phenomenon involving "Yu'E Bao (Leftover Treasure)," a
personal online finance product introduced in June by internet giant Alibaba.
It allows users to place their driblet savings — no less than one yuan — into a
money market fund.
As of the
end of 2013, Yu'E Bao had 43.03 million users with aggregate deposits of 185.3
billion yuan (US$30.4 billion), the biggest single public fund in China. Internet
finance has for the first time become part of life for many Chinese people.
Its users
come from all over China — more than 2,000 counties and cities in 31
provincial-level administrative regions with an average deposit of 4,307 yuan
(US$711.5) per user.
There is a
substantial difference between depositing money into a savings account with a
commercial bank and placing money with Yu'E Bao, since the latter offers users
wealth management services and a much higher return rate, said Zu Guoming, one
of the founders of Yu'E Bao.
Zu said
that Yu'E Bao is popular partly because of its return, which comes from the
money fund, with rates varying every day.
Return
rates could be as high as 7% for Yu'E Bao users. That is remarkably higher than
the roughly 0.35% interest rates offered by commercial banks, and also much
better than the one-year deposit rate of 3.25%.
By the end
of 2013, Yu'E Bao had brought 1.79 billion yuan (US$295.7 million) in profits
to users since its launch, according to the operator.
"The
launch of Yu'E Bao is like the tipping point for internet finance in
China," Zu said.
Tang Bin,
CEO of e-payment service provider YeePay, said that Yu'E Bao is revolutionary
since it integrates the two functions of wealth management and payment and is
user-centered with an extremely low threshold.
"Most
traditional banks are high and mighty with hefty thresholds. Some banks' wealth
management products reject customers with less than 50,000 yuan (US$8,259).
Yu'E Bao is fine with just one yuan, which illustrates the spirit of the
internet — being open with a bottom-up approach," Tang said.
Zou
Pingzuo, a researcher with the People's Bank of China, attributed Yu'E Bao's
popularity and high rates of return to the government's restrictions on
interest rates — a major source of bank revenue.
"Interest
rates have not been liberated. To ordinary people, deposit interest rates are
very low while loan rates are very high. At this point, the market remains
quite unfair," Zou told the dialogue program.
The
government's grip on interest rates created the chance for Yu'E Bao. And in
return, Yu'E Bao's huge success might help push forward interest rate
liberalization in China, he added.
Tang said
China's traditional banking services have two problems — a monopoly and being
inadequately market-oriented, which has left many customers under-served and
dissatisfied.
Zou
dismissed the idea of confrontation between internet financing and traditional
banking, saying that the two could serve different groups of customers.
Zu agreed.
Traditional banks tends to serve big enterprises with very good credit records,
while small and medium-sized enterprises and individuals have been
under-served, which created a good opportunity for micro-loan business, he
said.
The rise of
internet finance has had a strong impact on mindsets both in and outside the
traditional financial sector, and some old concepts have been overturned,
according to the Yu'E Bao founder.
Its
stunning success has led to more internet bees buzzing around the honeypot in
China.
In October,
China's search giant Baidu announced its own online wealth management product,
Baifa. Two months later, NetEase, another leading Internet technology firm,
launched its first online wealth management product, Tianjin.
Back in
June of 2013, one week after the launch of Yu'E Bao, Alibaba founder Ma Yun
promised to shake up the established order of China's financing in an article
run by the People's Daily.
"China's
financial industry needs disrupters. It needs outsiders to come in and
transform it," Ma wrote.
To some
extent, he has already succeeded in instigating that shake-up. Globally, the
encounter between the internet and finance has seldom been as dramatic as that
which is unfolding in China.
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