Tencent’s WeBank is China’s first internet based private bank

Country: Chinawebank
Year: 2014

  • WeBank, named after Tencent’s popular instant messaging and social networking app WeChat, is one of the two internet banks that were granted licenses by China’s banking regulator to set up a private bank. The other bank is Alibaba’s MyBanK. All these being an effort to accelerate reforms in the country’s banking industry
  • WeBank is an online-only bank without any physical branches and primarily serves individual consumers and small businesses
  • Tencent is the largest shareholder of WeBank with an ownership stake of 30%.The other two largest shareholders are Shenzhen Baiyeyuan and Shenzhen Liye Group with an ownership stake of 20% each

Value Proposition

  • Retail consumers and small businesses have long struggled with tight credit facilities offered by the state-owned banks in China. It is this gap that WeBank intends to fill in by providing quick and easily accessible banking services to these target groups
  • One of the remarkable services offered by WeBank is its micro loan service, which offers an unsecured loan of up to approximately US$31,000, within a matter of few minutes and without any traditional credit or background check. This “Weilidai” or in its literal translation “tiny bit of loan” feature is also available on the two popular Tencent-owned social networks, WeChat and QQ
  • WeBank enjoys an easy access to about 1.2 billion active users of Tencent’s social networks WeChat and QQ. This access not only provides WeBank with a huge potential customer base, but a critical “big data” advantage in evaluating the credit risk of its small borrowers
  • Apart from the Weilidai service, WeBank users can access wealth management products to invest in money market funds, fixed-income products and actively managed mutual funds
  • Users can also use their WeBank account to do transactions involving deposits, automatic salary transfers and fund transfers between the electronic and bank accounts under the same name

Long-term Growth Prospects

  • The long-term growth prospects of WeBank along with Alibaba’s MyBank are dependent on regulatory approvals to let customers open new bank accounts using face recognition technologies
  • The current regulations require a person to appear at the bank counters in order to open a renminbi bank account, thus the use of face recognition technology is considered a regulatory violation. However, these two internet banks are temporarily circumventing this regulatory obstacle by requiring customers to open an account using an active debit card issued by a traditional bank
  • Nevertheless, in the long run, internet-only banks in China will have to gain regulatory approvals to enable customers open bank accounts using face recognition technologies, instead of relying on the use of debit cards issued by the traditional banks

How does WeBank work?

  • Similar to an account opening process in any other bank, customers are required to provide personal details such as full name, ID card number and smartphone number along with password and swipe lock pattern. Further, as mentioned above, customers are required to register with an active debit card provided by a traditional bank, after which the customer receives a 19-digit WeBank account number
  • The registration of the first debit card only requires text message verification. However, if a second card is added to the WeBank account then the user is required to authenticate it by registering his facial features and providing a voice sample, using WeBank’s voice and face recognition technologies
  • The Weilidai feature evaluates the micro loan applications by utilizing the applicant’s data available on Tencent’s social networks along with individual loan information acquired from the People’s Bank of China. The total time for credit assessment is less than a minute
  • In terms of the specifics of the WeBank micro loan, the average daily interest rates are about 0.05% and the term period is up to 20 months

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