Alibaba Internet finance gets Seoul fillip

Group-backed online bank receives initial permit from South Korean government

Alibaba Group Holding Ltd is expanding its Internet finance business beyond China, after a local lender it helped co-launch got an online banking permit from the South Korean government.

Zhejiang Ant Small & Micro Financial Services Group Co, the Internet financial affiliate of Alibaba, said on Monday that the South Korean government has given preliminary approval to K Bank, the Internet bank it is jointly launching with telecom company KT Corp and other investors.

South Korea also gave preliminary approval to the online banking application of Kakao Corp, operator of South Korea's leading messaging app KakaoTalk, one of whose partners is affiliated to Tencent Holdings Ltd, the operator of WeChat service.

According to experts, the new online banking permits are an effort by the South Korean government to inject new momentum in the sector amid slow growth and slim margins.

"K Bank has got permission from the South Korean government to start preparatory work," Ant Financial said, adding the lender will soon apply for a banking license before starting full-fledged operations.

K Bank will be allowed to offer all banking services, including handling deposits, loans, credit cards and providing wealth management products, Ant Financial said. It is not immediately clear as to how much stake Alibaba has in K Bank.

The move comes close on the heels of Paytm, an Alibaba-backed Indian mobile payment platform, getting the Indian central bank's approval in October for a payment bank.

"We will leverage our experiences in Internet finance services to help Indian and South Korean partners better serve small and micro enterprises," said Jin Xiandong, president of Ant Financial.

In September, Ant Financial obtained a license from Chinese authorities to launch an Internet bank in its home town of Hangzhou, Zhejiang province. As of November, it has served 430,000 enterprises, with outstanding loans hitting 5.2 billion yuan ($813 million).

Analysts said the intensified efforts by Alibaba to explore international markets demonstrate the company's ambition to build an Internet-based financial empire.

Ma Tao, a senior analyst at Beijing-based Internet consultancy Analysys International, said co-launching an Internet-only bank is the most cost-efficient way for Alibaba to gauge the potential of overseas markets.

"No offline branch is involved in the partnership. If the plan fails, it will not incur too much of losses. But if it succeeds, it will help Alibaba better understand the South Korean market," Ma said.

Ant Financial already allows Chinese tourists to pay bills with its mobile payment tool Alipay in certain South Korean stores.

"Alibaba's experience in Internet finance and its cutting-edge technology such as big data and cloud platforms can give the e-commerce giant an edge in competing with foreign online banking operators," he said.

But Ma also warns that Alibaba is only one of the 20 investors in K Bank.

"Significant differences exist between offering online financial services itself and launching a joint bank."

Chinese Internet heavyweights are scrambling to offer consumers online financial services like money market funds, consumer credit and small loans.

Internet companies said the data they collect from their users, such as social networking behavior, e-commerce transactions and search results, can help measure the credit worthiness of consumers and enterprises.

Earlier this month, Baidu Inc, the largest Internet search engine in China, co-launched an online bank with China CITIC Bank Corp Ltd. Social networking giant Tencent Holdings Ltd also introduced its Internet bank, the first private online-only bank in China in December last year.

But Alibaba is the first among Chinese Internet players to expand its Internet finance services abroad.

Li Chao, an analyst at iResearch Consulting Group, said Alibaba may promote cooperation between the three Internet banks it supports. "Going global is one of the priorities for Alibaba. Partnerships in cross-border Internet finance will be instrumental to promoting its e-commerce business abroad."

masi@chinadaily.com.cn

(China Daily USA 12/01/2015 page13)