Internet companies provide payment, small loan services

An elderly student follows the instructions on her notes as she practices online shopping at Tianjin Senior Citizens' University in North China's Tianjin municipality, on Nov 23, 2012. [Photo/Xinhua]

Internet companies are expanding into China's financial industry. A good number of them are providing third party payment and small loan services. The moves are in line with government reform directives to diversify financial services.

New services to fill a growing need in the financial system.

Small and micro financing usually gets lost in the sheer size of the banks.

But that's starting to change.

And it's not the banks that are leading the way. Internet firms like Jingdong are stepping up.

When small business owners are given the no-s in banks, they might get a nod here in Jingdong. China’s second-largest shopping website is to provide micro-loans to its distributors and suppliers. So when banks won't lend, this could be an alternative to keep your business running.

Jingdong's suppliers and distributors can get funding more easily based on their credit history and account receivable records.

With its huge customer database, the Internet firm holds an advantage unmatched by the traditional means.

It also differs from bank lending, which require collateral and other conditions that small enterprises can't meet.

And Jingdong is not the only industry player.

China's largest e-commerce company, Alibaba Group Holding Limited, gone the furthest. An Alibaba small and micro finance service group has extended loans of over 100 billion yuan to SMEs and individuals on trading websites. Search engine Baidu, and Suning Commerce Group have also forayed into the sector.

The new service won't overturn the traditional model. But experts expect it to hold its own.

The much-needed dose of competition is expected to benefit the system as a whole.

Jingdong's new branch will open in Shanghai. Company executives are confident the favorable policy environment will give it a head start in the business.