China’s largest search engine provider Baidu Inc, has formed a partnership in order to apply for multiple banking licenses. This move accelerates its growth from acting as a store front for money market funds to a certified financial institution.
"Of the businesses the Internet will topple they naturally include finance,” said chief executive Robin Li. “Baidu is now applying for multiple banking licenses, including payment, but because we're still in the process of applying it's not convenient to reveal too much."
Baidu as well as other Chinese internet companies like Alibaba Group Holding Ltd and Tencent Holdings Ltd have offered wealth management products since 2013. They have attracted millions of investors thanks to interest rates on consumer deposits that are higher than those offered by banks, which are subject to a cap of 3.3 percent for one-year savings.
Deposits in Baidu Wallet, the wealth management service run by China’s leading search engine and web portal, reached its investment limit of one Billion yuan ($163.23 Million) in less than five hours after its launch. The tech company’s new product is widely seen as a challenge to Alibaba’s online personal finance service Yu’ebao.
"What Baidu does at the moment is market financial products. This is just a more convenient way of selling currently available financial products to an audience," said Li. He adds "We will promote the healthy development of Internet banking, improve the mechanism for coordinating financial oversight, keep a close watch on the cross-border flow of capital, and ensure that no systemic or regional financial risks occur."
LTP view: Imagine if Baidu also launches a consumer internet-cum-mobile wallet. One that you could use online, in stores and in transit. In China numbers start adding up quickly. We have seen a similar movie earlier when one of the Chinese local born network Unionpay started challenging Visas and Mastercards of the world. Now it has one of the highest cards population globally, offers lower rates and fulfills the promise of keeping money within the country. Given the Google like popularity of Baidu in China there is something big in payments waiting to be seen by the China and by us.