Online financial services threaten China’s traditional banks

Online financial services threaten China’s traditional banks

Kung Chun-jung and Staff Reporter

2013-06-16

The rapid emergence of the internet industry in China, which provides a broad range of online financial services, has posed a severe threat to the traditional banking and financial sectors, the money page of Chinese internet portal NetEase reports.

The emerging trend of online third-party payments, peer-to-peer (P2P) lending and P2P microfinance services has significantly eaten into the benefits offered by the established financial sector, the report said.E-commerce giant Alibaba’s microcredit company, founded in June 2010, has served more than 250,000 clients and had lent 12 billion yuan (US$1.96 billion) during the first quarter of this year. Meanwhile, its non-performing loan ratio was far lesser than that for similar loans. This had made it the most profitable microcredit company, according to the report.

Moreover, even insurance policies and mutual fund products have been made available online, giving rise to a crisis in the banking and financial industry.

One of the most remarkable online insurance companies was the one set up in August last year by Ma Mingzhe, the chairman of Ping An Insurance Group; Alibaba chairman Jack Ma; and Ma Huateng, the chairman of Tencent, China’s largest internet service company, the report said.

Insurance companies were reporting the highest number of sales through the internet. This was evident in the more than 5 million yuan (US$815,000) in insurance products sold at Taobao every day and the 101 million yuan (US$16.5 million) in insurance products sold by Kuo Hua Life Insurance through the internet within three days in December, the report noted.

Starting from March, mutual funds companies had been allowed to sell their products online and nearly 30 fund companies had joined a fund payments process channel established by Alipay, China’s leading electronic payment platform. Investors will be allowed to buy funds at alipay.taobao.com from July.

Given the circumstances, traditional commercial banks have gone online to protect their market share and business benefits. Xiao Gang, the former chairman of the Bank of China and now head of China’s securities regulator, has attended more than 10 internet innovation classes. Meanwhile, China Construction Bank’s e-commerce transactions have broken the 3.5 billion yuan (US$570 million) mark, according to the report.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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