Increasing online competition in the banking sector is shaking up traditionally staid business models around the world. But for Chinese banks – already struggling to adapt to liberalisation – this shift is turning out to be seismic, as the country’s institutions face a wave of competition from internet finance companies that is changing the industry landscape.
Where existing banks have legacy systems and processes, companies emerging from the technology side have the advantages of agility and deep technical talent. Now they are quickly building the financial capabilities to compete head-to-head with traditional financial institutions.
The Chinese government has announced a pilot programme of banks owned entirely by private companies such as Alibaba and Tencent, as it steps up liberalisation of its financial sector. Tencent is one of the participants in Webank, which will focus on lending to small firms and consumers. The official entry into the banking sector of online groups further blurs the boundary between internet companies and financial institutions.