Established Banks Turn to Internet Giants as Fintech Competition Intensifies

The Chinese banking sector is seeing a wave of co-operation with the country’s increasingly powerful online giants in a bid to shore up their fintech competitiveness.

According to David Yin, vice president and analyst at Moody’s financial institutions group, nearly all of China’s mid-sized and commercial banks have entered commercial agreements with either Alibaba, Baidu or Tencent over the past several  years.

Banks are engaging in greater collaboration with the tech sector not due to concerns that they will be displaced or rendered obsolete by upstart companies, but in order to better compete against other lenders as fintech rises to prominence in China.

Mobile payments company Ant Financial embodies the rise of Chinese fintech, with the Alibaba-affiliate amassing around 520 million users in under 15 years to become the world’s highest valued fintech company, as well as manager of the world’s biggest money market fund – Yu’e Bao.

In just the past several months Ant Financial has struck deals with some of China’s leading commercial banks, including China Everbright Bank, Huaxia Bank and Shanghai Pudong Development Bank, with the company expecting technology service fees to be a mainstay of revenue for the upcoming five years.

Ben Bystrom, formerly a Tokyo-based executive for Morgan Stanley and Merrill Lynch, said to CNBC that Chinese fintech firms have emerged as “very, very powerful financial entities as a result of dominating the mobile payment system,” and are “competing better than they ever have” in a global context.”

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