China Citic Bank and Baidu have received regulatory approval for their joint venture lender to begin business operations, marking the latest foray into the banking sector by the nation’s tech giants. The joint venture, Citic aiBank, originally known as Citic Baixin Bank, has a registered capital of 2 billion yuan (US$300 million). It is 70 per cent owned by Citic Bank while China’s dominant search engine operator Baidu holds the remaining 30 per cent. The new bank’s scope of operations include deposits and loans – mainly from individuals and small and micro enterprises, bank card business, bancassurance and interbank business, Citic Bank said in a stock exchange filing disclosing approval for its operations from the China Banking Regulatory Commission. The new bank will mainly offer its services via online banking without physical branches. Li Qingping, chairman of Citic Bank, will serve as chairman of aiBank while Li Rudong, the former head of Citic Bank’s e-banking department, will be president. Baidu’s seismic shift towards AI must start delivering the goods The naming of aiBank reflects the bank’s aim to build up its strength in the red-hot artificial intelligence (AI) sector. “AI is the core element of the bank’s branding, and the bank will offer a spate of innovative services by riding on Baidu’s technology in AI and massive amounts of data,” Baidu said. Baidu is the latest among the nation’s three technology giants, including Alibaba Group and Tencent Holdings, to set up a banking arm to serve the nation’s increasingly tech-savvy consumers. Tencent was the first among the tech majors to set up a banking arm, holding a 30 per cent stake in WeBank, which started operations in December 2014. Separately, Zhejiang E-Commerce Bank, or MYbank, the banking affiliate of Alibaba, has served at least 2.77 million small businesses since starting in 2015 by leveraging the large number of small businesses from Alibaba’s e-commerce platforms. Both banks were profitable in 2016 after losing money in 2015. Alibaba owns the South China Morning Post . Baidu set for strong quarterly earnings as AI push intensifies “The future success of aiBank lies in its ability to differentiate itself from rivals by making full use of its two shareholders’ strengths,” said Zhang Xingrong, managing director at BOC Institute of International Finance. “Though a late comer compared to its tech rivals, Baidu’s banking arm can still find a niche in the highly competitive market if it can find the right customers and the right business model with the appropriate risk and cost control mechanisms.” However, Zhang noted it wouldn’t be an easy task given the already cutthroat competition in the industry. Xu Wenbing, chief banking analyst at Bank of Communications, said direct banking will become a key model for traditional banks amid the rise of financial technology. “As a new bank [aiBank] can enjoy higher flexibility and independence compared with traditional banks when seeking deeper cooperation with internet firms,” Xu said.