Alibaba’s new internet bank hits regulatory obstacles
Chinese e-commerce giant Alibaba is set to become an online financial network by launching a new internet bank this month, according to media reports.
Run by Ant Financial, the group’s financial arm, MYbank will initially offer limited services due to security concerns from Chinese authorities regarding its facial recognition technology, the Wall Street Journal reported on Friday.
According to the original plan, users would be able to open an account remotely by snapping a photo of themself on their smartphone. The photo would then be verified by cross-referencing the information on their ID card that is stored in police databases.
However, China’s central bank and public security ministry have voiced concern that the technology may include security risks.
They say bank accounts must be opened in person as private banks are subject to the same regulation as state-owned banks, which rigorously enforce this rule.
This would restrict MYbank’s ability to issue loans and receive deposits when it launches later this month. A specific date has not been given.
The apparent roadblock comes despite China’s move to welcome private banks in a bid to encourage competition in the state-controlled banking industry.
Last year, Alibaba and rival Tencent were among those chosen to participate in a trial programme that allows private banks to operate in several Chinese cities and provinces.
The programme aims to boost the accessibility of financial services for private companies, as big banks often prefer lending to state-owned enterprises due to the lower level of risk.
MYbank will push forward, however, and is seeking co-operation with other banks to work around the restriction, its vice president Zhao Weixing said on Friday.
Other online banks may face similar hurdles.
Tencent launched its online banking initiative WeBank in January using facial recognition technology to verify users’ identities.
Although it is still in a trial period and is not yet open to the public, it could also hit regulatory obstacles related to lending and deposits if there are no brick-and-mortar branches for customers to sign up in.
MYbank’s tribulations highlight how new technologies can present a serious risk if internet-only banks are not properly regulated, Jim Antos, a banking analyst at Mizuho Securities Asia in Hong Kong, told the newspaper.
Meanwhile, Alibaba announced on Monday that it will also venture into the realm of online video streaming services in a bid to forge China's answer to Netflix and HBO.