Categories: News

Chinese Payments Giants Alibaba And Tencent Are Now Bankers

China’s two biggest online services already have large payments operations — and now both have permission to be bankers, too. On Monday (Sept. 29), Alibaba Group’s Alipay affiliate won permission from the China Banking Regulatory Commission to set up a privately owned bank, according to the Wall Street Journal. Alipay processes most of the transactions on Alibaba’s e-commerce websites.

Alibaba’s chief Chinese rival, Tencent Holdings, got similar approval to go into banking in July, when a group that includes Tencent got regulators’ permission to open Webank, which plans to provide banking services to individual consumers and small businesses. Webank is based in Shenzhen, just across the border from Hong Kong, and is already filling its management ranks with employees from traditional banks.

Alibaba said on Monday that Alipay’s bank will be headquartered in Hangzhou, about 100 miles from Shanghai, and will operate Internet banking services. The new bank still needs to get approvals from local banking regulators to start doing business, and won’t begin operation for another six months, Alibaba said.

Alibaba and Tencent compete fiercely both online and off. While Alibaba handles the largest share of e-commerce transactions in China, Tencent is the leader in messaging and online games. Both companies have also poured money into Uber-like taxi-hailing services and other offline efforts.

In Alibaba’s case, Alipay already offers small-business loans, as well as money-market accounts that are attractive to consumers because they deliver higher interest rates than regular bank savings accounts. Starting in September, Alipay added the ability to transfer money automatically between regular bank accounts and the money-market accounts so that, for example, customers could automatically deposit a portion of a monthly salary or automatically pay monthly bills.

Tencent launched its own money-market fund in January as part of its WeChat smartphone messaging service, which comes with its own electronic payment feature.

Banking approvals for the two Chinese online giants represent a marked contrast to financial-services efforts by U.S. online services and offline retailers, where competition is arguably even fiercer. For example, Apple had to cut deals with large banks who issue credit and debit cards in order to launch its new Apple Pay payments service Previous mobile-wallet efforts like those from Google and Softcard struggled without successfully doing the same kind of deals.

Even Walmart has had to partner with banks such as American Express and Green Dot in order to provide banking services. The world’s largest retailer said last month that it will offer mobile-phone-based checking accounts with no overdraft fees through GoBank, a banking service from Green Dot. Walmart is also spearheading the CurrentC mobile-payments service, which is designed to cut traditional payment-card costs to retailers by making payments directly from a customer’s checking account.

Walmart has been specifically targeted by traditional bankers to block it from getting Federal Reserve approval to operate a bank on its own. In 2012, a group of 12 bankers who advise the Federal Reserve Board said in a meeting that they wanted the Fed to limit payments to “regulated banking institutions” — but also acknowledged that they they have successfully blocked Walmart from becoming one of those regulated banks for more than a decade. Those comments, which were intended to be confidential, were <a href=””>only made public months later by Bloomberg News</a> after a Freedom of Information Act request.

Get our hottest stories delivered to your inbox.

Sign up for the Newsletter to get updates on top stories and viral hits.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.


Recent Posts

Agora Services Debuts New Tools For SMB Banking

Challenger bank Agora Services wants to address challenges with banking for small businesses with a new solution called Agora SMB,…

1 hour ago

Google Almost Done With Transition To SAP Ariba Network

Google's transition to SAP Ariba's cloud-based services has a completion date set for Aug. 24 after multiple waves that began…

2 hours ago

Fed Moves Ahead With FedNow Despite Objections

Not everyone favors the Federal Reserve Board’s launch of its settlement service designed to eliminate the three-day check clearing and…

2 hours ago

Pelosi, Mnuchin Call For Reopening Stimulus Talks

Weeks of failed negotiations on pandemic-related aid has led to House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin, representing…

2 hours ago

Bitcoin Daily: S. Korea To Use Blockchain To Collect Highway Tolls; Polish Financial Watchdog Warns Of Fake Crypto Scams

South Korean highways could see blockchain-based toll booths before the end of the year, according to a report from Crypto…

3 hours ago

CHAMPS Group Purchasing Works With Procurement Partners On Smoother P2P Services

CHAMPS Group Purchasing is partnering with Procurement Partners, which works in procure-to-pay (P2P) solutions, to provide a new service for…

3 hours ago