Tencent, one of the top Internet companies in China, launched the country’s first private online bank today. Called WeBank after Tencent’s popular messaging app WeChat, the financial institution is the first one in China to be based on the Internet.
Tencent and rival Alibaba were among ten private investors that were approved by the Chinese government last year to launch five private banks. The goal of the pilot program is to make credit more available to small businesses, which are often at a disadvantage when it comes to securing loans from state-owned banks despite being integral to China’s economic development.
During WeBank’s launch ceremony in Shenzhen today, China premier Li Keqiang said “we will lower costs for and deliver practical benefits to small clients, while forcing traditional financial institutions to accelerate reforms.” According to the Financial Times, WeBank’s first loan (made when Li pressed a button) was 35,000 RMB (about $5,600) to a truck driver.
While Alibaba and Tencent already compete in e-commerce, messaging, and big data, the financial sector is a relatively new battleground for the two companies.
Tencent’s first financial services product, a fund called Licaitong, was launched in January 2014, while Alibaba, Baidu, and electronics seller Suning Commerce Group also got government licenses to offer mutual funds, loans, and insurance.
The pilot program Tencent is taking part in is part of the Chinese government’s efforts to reduce the amount of control state-owned banks have on its economy and further its ongoing efforts at financial reform. Companies seeking to launch private banking services in China hope to take advantage of waning confidence in the country’s state-owned banks, which have recently seen an increase in bad loans thanks to slowing economic growth.