Chinese Internet Giant Tencent Launches Internet Only Bank To Increase Market Share

Today, Tencent delivered what many small businesses and startups in China have been eagerly waiting for: the country’s first Internet only bank. Launched by Tencent, one of China’s biggest Internet companies, the online bank aims to make it easier for small privately owned businesses to secure loans.

This is all part of the government’s attempt to combat criticism of the current banking system, which is dominated by state-owned banks and has been accused of favoring private enterprise. In addition to Tencent, ten other companies, including Alibaba, have been approved to launch private banks. However, Tencent is the first to launch a private online bank.

Photo Credit: Michael Coghlan / Creative Commons

WeBank, as the new bank is called, made its first loan of 35,000 RMB (about $5,600) to a truck driver at the bank’s opening ceremony, symbolizing its commitment to making credit available to small businesses. This is significant considering that small to medium-sized businesses are believed to provide 60 percent of China’s gross domestic product and generate 60 percent of new jobs. “We will lower costs for and deliver practical benefits to small clients, while forcing traditional financial institutions to accelerate reforms,” China premier Li Keqiang said.

However, the launch of WeBank is about more than Tencent’s attempt at restoring the country’s faith in the failing banking system.

A major economic player

Valued at over $100 billion, Tencent is a major economic player in China. In fact, the company’s messaging application, WeChat, is believed to be valued at $64 billion. This is three times what Facebook acquired WhatsApp for. With over 600 million users on the messaging app daily, Tencent currently dominates China’s mobile market.

Alibaba, one of Tencent’s biggest competitors, is also competing for its share of the banking industry. In addition to being part of the government’s private banking pilot, Alibaba has already launched a private investment fund that eliminates transaction fees and offers a better return than most state-owned banks.