Alibaba Races Ahead On Big Industry Opportunities, Mybank To Offer Loans Based On Alipay Transaction Analytics

MEDICIFounder and Chief Strategy & Innovation Officer

China's e-commerce giant Alibaba has launched an Internet bank called MyBank which will offer loans to small and medium-sized enterprises (SMEs). They are targeting the market that is not served by traditional financial institutions. Unlike its conventional competitors, the online bank neither deals with cash nor with big clients but instead focuses on the bottom 80% which is the small, mid and micro-sized businesses. MyBank’s target customers lie in rural China.

Now, let’s analyse why MyBank is different from traditional financial institutions. MyBank will not be taking collateral from debtors. Instead, it will look at the financial data that customers and small businesses have accumulated on Alipay, Ant’s third-party payment service used by vendors and buyers on Taobao and Tmall to purchase items. Data-driven loan provision is the next big thing, and that is exactly what MyBank will be doing.

The company said that it will only be providing a single service, i.e., loans, but it also aims to offer deposit services and credit lines to customers.

Alibaba's affiliate Ant Financial Service—which owns 30% of MyBank—will offer loans of up to five million yuan (USD 800,000). MyBank has four billion yuan (USD 654.15 million) in registered capital, state-run Xinhua news agency reported.

President of Ant Financial Jing Xiandong will be serving as MyBank's chairman. The other shareholders include Fosun Industrial, Wanxiang Sannong, and Ningbo Jinrun—three Chinese conglomerates with investments in agriculture, insurance, machinery and other industries. MyBank is one of the five new private banks approved by the China Banking Regulatory Commission in late 2014.

Tencent, another Chinese Internet conglomerate, launched China’s first private bank called WeBank in January this year.

Tencent and Alibaba both plan to exploit the “big data” advantage using valuable user information to evaluate credit risk of small borrowers.

A significant challenge for Internet lenders will be attracting deposits. It will be more interesting to watch how much success these Internet banks achieve when it comes to attracting deposits.

Amit Goel

MEDICIFounder and Chief Strategy & Innovation Officer

Amit Goel is the Founder & Chief Strategy & Innovation Officer for MEDICI. Amit’s vision is to build a strong FinTech market network that involves financial institutions, banks, startups, investors, analysts & other key stakeholders across the ecosystem – helping each one of them in a meaningful way by removing the asymmetry of information and providing a platform to engage & transact.

Amit is passionate about bringing actionable FinTech-focused insights, innovative products & services for the FinTech ecosystem. Some of his work involves startup scores, bank scores/assessments, predictive viewpoints & other innovations that have helped MEDICI’s customers and the ecosystem. He has been named amongst the Top 100 FinTech thought leaders/influencers in the world & Top 10 in Asia multiple times by reputed agencies, consulting firms as well as financial institutions. Amit has built MEDICI (formerly LTP) as a new-age, tech-enabled advisory/research firm, which is now considered the #1 global research & innovation platform for FinTech in the world.

Amit has been writing pioneering viewpoints on financial technology space that have been ahead of the curve since 2010. His data-driven predictions have helped the customers as well as the ecosystem. His past work experience includes a strong background in strategy & market analysis and advisory to clients (from big business houses to Fortune 500 firms) in payments, commerce, financial services & IT/technology. In the past, Amit had also founded a successful consulting & research practice called GrowthPraxis and has worked at Boston Analytics, Frost & Sullivan, and Daimler Chrysler in strategy & research.