- December 2, 2016
On June 25th 2015, the Internet-based commercial bank named MYbank was officially launched. It is one of the first six private banks in China. Compared to traditional banks, MYbank is supposed not to use cash but only to work online. This model of Internet-based commercial banks has already been launched in the United States and in Europe before.
The main sponsor of MYbank is Alibaba’s Ant Financial (30%) but also the Shanghai Fosun Industrial Technology Development Co. (25%), Wanxiang Sannong Co. (18%) and Ningbo Jinrun Asset Management (16%).
MYbank’s initial strategy was to concentrate on issuing small affordable loans of less than RMB 5 million (about $800,000) to small- and micro-sized enterprises, entrepreneurs and consumers. MYbank will use Internet technologies to provide online financial services at e-commerce platforms. There won’t be no physical subsidiaries, no cash businesses and no financial services such as checks, money orders or the like. With a high degree of cooperation between industries, MYbank won’t do their own loan business but will position itself as a platform connecting financial institutions and small businesses or individuals. The platform business model will generate profit by charging either its customer or partners.
Alibaba is operating in e-commerce and has expert knowledge in foreign trade business, entity shop sellers as well as individual customers and customer groups with better financial foundations. Based on Alibaba’s self-developed calculation architecture, MYbank is one of China’s first completely Internet-based banks. It can significantly reduce operating costs and, with the expansion of business, will be able to continue increasing its profit. Another core competence of MYbank is its large data capacity. In comparison to other private banks Alibaba has offered small loans, so-called “ants”, within the large data and Internet technology to solve the financing difficulties of small micro-enterprises already for the last five years.
Traditional banks – Run for your lives!
Alipay and other Internet financial services have fully demonstrated the product innovation capability of Internet companies. The rapid rise of mobile-based integrated financial service products has achieved a good reputation, proven by hundreds of millions of users. Traditional bank users are getting rare and become more and more alienated from these institutions.
WeBank and MYbank are booming and have the ability to build a new financial ecosystem. They won’t stop for the traditional banks. Traditional services like face-to-face bank account openings go out of date. The pressure on the regulators increases and the tolerance level of stagnating reforms exhales.
Due to the strict internal hierarchy of traditional banks their promotion opportunities are scarce. In comparison, the rapid development of Internet banking and private banking offers seem very attractive for (young) professionals. This is why we can say that the progressive development and expansion of private banks will be accompanied by a huge lay-off since the pressure on profitability keeps on rising for conventional banks. Esteemed colleagues become the most threatening opponents because they go to the online competitors. This should be a wake-up call for traditional banks to act accordingly and to act fast. The old financial order is going to be “reloaded” soon.