Chinese search company Baidu Inc. and China Citic Bank Corp. are planning to set up a direct bank, which would offer investment products and loans online. The move marks the Internet company’s latest push to better compete against its rivals in the rapidly growing space for online financial services.
China’s Internet companies are competing to offer users online financial services such as money-market funds, consumer credit and small loans in an effort to attract more users. The Internet companies say the data they have collected from hundreds of millions of mobile devices—ranging from location to the use of local services to e-commerce transactions—which can help measuring borrowers’ creditworthiness.
Baidu and Citic Bank have yet to submit an application to the banking regulator for a license that would be required to establish such a bank, the person said. If approved, the bank, like other direct banks, would likely be focused on selling so-called wealth-management products—such as money-market funds and other investment products—and providing loans to consumers and small companies, the person said.
The partnership would allow users to open direct banking accounts through Citic Bank’s physical bank branches, the person said. Baidu could potentially bring to the partnership access to its customers, the majority of which are small and midsize companies. Last month, Baidu said it had about 623,000 active online marketing customers in the third quarter. Small corporate borrowers typically find it hard to get loans in China. Large banks lend primarily to state-owned enterprises because those companies have implicit or explicit government backing for debt repayment.
Several small and midsize banks in China, including China Minsheng Banking Corp., have set up their own direct banking operations to draw clients with investment products.
Baidu, the Chinese search company sometimes called the Google of China, is a relative latecomer to financial services, though it has seen rapid growth in the number of users of its digital payment platform. State-controlled Citic Bank is China’s seventh-largest commercial bank by assets.
E-commerce company Alibaba Group Holding Ltd., through its financial affiliate, and social-networking and games company Tencent Holdings Ltd. have made forays into financial services and online banking. Their online-only banks, however, have been largely stymied by regulations that forbid users from opening bank accounts remotely. This means the banks are limited in their ability to collect deposits and conduct other banking services.
Source: Wall Street Journal
