Banks, Internet finance companies should cooperate on providing strong online services

Industrial experts Friday called on Internet financial companies and banks to cooperate more on financial services, in light of a growing rivalry between the two as Internet competitors have made a substantial splash in the traditional financing industry.

Banks and Internet financial companies need to achieve a convergence and then the two can develop in the future, Liu Zehui, general manager with Beijing-based private equity company Legend Capital, said at an Internet financial summit held in Beijing Friday.

"We expect to cooperate with banks in order to tap their large amounts of public deposits as well as individuals' credit records, which will save us much time and effort in deciding whether we should lend money to a client," Deng Lang, an executive with a Beijing-based person-to-person (P2P) start-up, told the Global Times Friday.

Meanwhile, traditional banks can learn from small Internet companies which have better knowledge of offering financial service in the Internet era, remarked Zeng Gang, a department head at the Chinese Academy of Social Sciences.

Instead of switching completely to online financial services, a fusion of offerings from both online and off-line services are expected, David He, a Hong Kong-based principal at the Boston Consulting Group, told reporters in Beijing on Thursday while releasing a report on the nation's retail banking.

The report noted policymakers have shown a tolerant stance toward regulation of the emergent digital finance, which would intensify the rivalry in the financial sector while also serving as a boon for traditional banks if they engage in the sector.

It seems that banks have already sensed the necessity of embracing Internet finance and industrial convergence, as financial services offered by Internet companies - such as Internet fund product and P2P credit model - are eroding the banks' deposit holdings.

According to a report released by the People's Bank of China in September, China saw new yuan deposits hit 108 billion yuan in August, down 699.5 billion yuan over the same period a year earlier.

Against such a backdrop, China Guangfa Bank, for instance, on Monday signed a strategic deal with domestic Internet mammoth Baidu Inc to co-explore the Internet financial industry. Bank of Beijing and Beijing Xiaomi Technology Co reportedly inked a similar deal on Friday.

Banks have rolled out their own Internet fund products, which now total 15, while Internet companies run a total of 11, the Guangzhou Daily newspaper reported Thursday.

As of August, the Internet fund product Ruyibao, launched by China Minsheng Bank in Feburary, raked in 110 billion yuan, media reports said.

But Internet companies' monetary management platforms appear to still be more highly preferred by investors, handling 845.4 billion yuan as of Thursday, while banks' Internet fund products attracted 212.8 billion yuan, according to the Guangzhou Daily.

Guo Tianyong, a finance professor at the Central University of Finance and Economics, said at the summit that besides Internet fund products, P2P micro-financing services are also developing rapidly.

Online P2P platforms link micro-credit lenders and borrowers, allowing global donors to lend money to Chinese individuals.

This financing model has received a warm reception among enterprises that are too small to get loans from banks. As of August, there were 1,357 P2P platforms in China, handling 125.3 billion yuan, which surpassed the total transaction volume in 2013, according to data from p2p website wangdaizhijia.com

P2P is now a large but disorderly market due to a lack of clear regulations, said Guo.

In April, a Shenzhen-based P2P platform reportedly mysteriously vanished, leaving 600 investors unable to claim their 20 million yuan investment.

Deng warned individual investors that they should not invest in platforms that offered returns of over 20 percent, which is much higher than the regular return of 10 percent.