Minsheng, Alibaba to creat 'direct bank'

Alibaba Group Holding signed a strategic partnership agreement on Monday with China Minsheng Banking Corp, the country's first non-State-owned lender, on offering a variety of banking services, signaling the e-commerce giant's further penetration in the banking industry.

The tie-up includes cooperation on wealth management, credit card, direct banking and information technology, the two companies said in a joint statement.

Minsheng will issue wealth management products catering to users of taobao.com, Alibaba's online marketplace, and launch direct banking services on the website, the statement said.

Direct banking accounts of Mingsheng's customers will be integrated with user accounts on Alipay, a third-party online payment platform under Alibaba, according to the statement.

"It will be the first direct bank in China. Being pioneers in the sector, the two companies are still mulling what kinds of financial services can be provided in accordance with China's laws," Zhang Daosheng, a public relations manager at Alipay, told the Global Times Monday.

Direct banks usually have no branches and mainly offer services via the Internet, telephone and ATMs. They always offer higher interest rates or lower service charges than their traditional counterparts due to low operational costs.

The partnership is Alibaba's first step in building an open finance platform and serving micro and small enterprises as well as grass-roots customers, Peng Lei, CEO of Alibaba's financial service group for micro and small enterprises, said in the statement.

Alibaba started the micro-loan business in 2010, and offered loans totaling 100 billion yuan ($16.32 billion) by the end of June.

In June, Alibaba also launched Yu'E Bao, a wealth management product allowing users with money deposited in Alipay to directly invest in a money market fund.

Ahead of the partnership, Hong Qi, president of Minsheng, said in June that Alibaba's forays into financial services have challenged the banking industry, as the Internet giant can offer lending, credit card and wealth management services to its large number of customers in a more convenient way than traditional banks.

The tie-up is a milestone for the development of Internet finance in China, and will benefit both sides, Hong said in Monday's statement.

"Cooperating with commercial banks is a practical choice for Alibaba to penetrate the finance sector, as currently it does not have a banking license," Feng Lin, an analyst at China e-Business Research Center, told the Global Times Monday.

Authorities can offer Alibaba a banking license and allow it to conduct the deposit business, as a means to encourage financial innovation and private investment in the banking industry, Wu Xiaoling, former vice governor of China's central bank, suggested at a banking industry forum held in Beijing Saturday.

"Banking services that Internet companies could offer are simpler and more standardized than commercial banks, so they will not bring much threat to traditional banks," Wu said.

The capital market showed optimism about the companies' tie-up. Shares of Minsheng rose by 4.43 percent during Monday trading on the Hong Kong Stock Exchange.