China’s Internet Behemoth Tencent Launches WeBank Mobile Platform

Tencent has officially launched its WeBank banking app equipped with the Internet company’s cutting-edge facial recognition technology.

Currently, an electronic account opened with WeBank allows transactions involving deposits and wealth management products. At the same time, fund transfers between electronic and bank accounts under the same name can be completed; it does not support POS transactions or the transfer of money to others.

According to Tencent, remote opening of accounts is not allowed given the policy restrictions and security concerns. However, after opening an electronic account using the client's real name and identity card as well as binding a debit card under the same name to the electronic account, the client can add yet another bank card, which requires facial recognition for verification.

The Tencent-BestImage team belongs to the Tencent Social-Network-Group(SNG) and mainly focuses on image processing, pattern recognition, machine learning and data mining. Earlier, Tencent-BestImage's Research and Development Supervisor, Huang Feiyue, had shared with News Media Live that the accuracy of the company's facial recognition technology had reached 99.65%. This success can be attributed to strategic cooperation between Tencent and the National Citizen Identity Information Center, affiliated to the Ministry of Public Security.

However, if the appearance of the user differs much from their ID photo, the user should contact service staff for manual verification, Huang said in the news article.

Small, privately owned companies have struggled a lot in getting loans from state-owned banks. The state-owned banks usually prefer lending to large, state-owned groups. In China, small and medium-sized businesses provide around 60% of China’s GDP and generate around 70% of new jobs.

Tencent, the Chinese Internet conglomerate, launched China’s first private bank called WeBank in January this year. WeBank was the first private bank to start operations under the pilot program. With an effective payments service portfolio already set up by Tencent, the banking license will enable Tencent to become one of the strongest competitors to the state-owned players who have so far dominated this landscape.

China’s e-commerce giant Alibaba launched an Internet bank called MyBank which will offer loans to small and medium-sized enterprises (SMEs) in June 2015. 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.

Tencent and Alibaba both plan to exploit the big data advantage using valuable user information from their large subscriber bases to evaluate the credit risk of small borrowers.

Another significant challenge for these and other 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.