Joint accounts

Sharing the credit

This year Yu’ebao, the money management service run by Alibaba-affiliate Ant Financial, became the world’s largest money market fund, handling Rmb170 billion ($25 billion) of assets in the first quarter. The fund was created four years ago as a savings account for Alipay customers to deposit their account surpluses. But its competitive annual return – around 3.9% – has made Yu’ebao a popular alternative to banking saving.

AliPay has already rattled the traditional lenders with a payment system which bypasses the banks, as well as the nation’s number one card payment processor, UnionPay. WeChat’s mobile wallet and payment function WePay has been equally disruptive to the industry. Yet despite this rivalry, Chinese lenders and the tech behemoths have become unlikely partners.

Ant Financial was the first to ink a deal with one of the Big Four state-owned banks. In March the company joined China Construction Bank (CCB) to cooperate on developing an online credit card application system, electronic payment processes and credit scores, as well as sharing QR code technology.

The deal will allow customers to purchase CCB’s wealth management products directly from AliPay. According to Beijing Business Today such online funds were prohibited from selling banks’ financial products before the deal was struck. Sina reckons the greatest victory for Jack Ma is getting CCB’s partnership in credit scoring, enlisting a major lender to back his belief that “credit [data] will be greater than wealth”.

Next to link up with a state bank was JD.com, Alibaba’s closest e-commerce rival and a company that might legitimately make a case it should replace Baidu in the BAT triumvirate (JD’s market value this week surpassed that of Baidu’s, suggesting perhaps JAT should be the new name).

During the company’s annual shopping festival on June 18, the number of transactions that processed through its own payment service, JDPay, swelled 240%, with offline payments rising tenfold. Leveraging its growing prowess in fintech, JD also shook hands with Industrial and Commercial Bank of China (ICBC), promising to deliver financial products, issue corporate credit, provide asset management services and likewise develop fintech.

In March the online retailer sold a stake in its financial arm, dubbed JD Finance, for a reported $2.1 billion to a (so far) undisclosed buyer.

According to the South China Morning Post, the sale gives JD.com the option to maintain a 40% equity stake in the unit and CEO Richard Liu will keep the majority of the voting rights, creating a rival to Jack Ma’s Ant Financial.

Shortly after JD’s agreement with ICBC was announced, Baidu partnered with Agricultural Bank of China (ABC). China Business Journal reports that Baidu boss Robin Li considers ABC’s scale, “perfect” structure, and calibre of customer to be the bank’s most covetable assets, and in exchange Baidu is bringing its expertise in artificial intelligence and Big Data.

Li adds that he hopes the crowning achievement of his cooperation with ABC will be innovations that bring the banking industry into the “smart finance” era.

With the other players already aligned, all eyes turned to Tencent, with observers half-joking, half-anticipating that it would team up with Bank of China. Tech-watchers didn’t have to wait long: the two were hitched less than a week after Baidu and ABC. The duo announced they would develop a fintech laboratory which, similar to the other partnerships, would research AI and Big Data but also dabble in blockchain technology.

The flurry of announcements hasn’t been surprising to Zeng Gang, director of the banking research office at the Chinese Academy of Social Sciences.

Zeng reckons the time is ripe for cooperation between the two sectoes: “It’s no longer a matter of who can topple who. The structures of the banking and internet industries have different advantages, so they can actually complement each other very well.”

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