China Mobile, Sina Join Financial Service Frenzy
China’s boom in online and mobile commerce is driving a new explosion in complementary financial services, with the latest offering coming through a tie-up between China Mobile (HKEx: 941; NYSE: CHL) and Shanghai Pudong Development Bank (SPD) (Shanghai: 600000). At the same time, media are reporting that leading web portal Sina (Nasdaq: SINA) is getting ready to roll out its own new online banking product, seeking to tap demand from the more than 500 million registered users for its popular Weibo microblogging service, often called the Twitter of China.
All of these moves stem from the same trend among Chinese consumers, who are demanding new electronic financial services as they conduct more of their daily business such as shopping and banking online and through other electronic means. E-commerce giant Alibaba was one of the first to spot the trend, initially setting up its AliPay electronic payment services to help customers pay for their online shopping. More recently, it has added a wide range of other new financial services, including its newly launched Yu E Bao product that lets consumers invest spare cash from their AliPay accounts.
Among the 2 newest deals, the SPD tie-up with China Mobile looks especially intriguing because it’s one of the first such pairings that I’ve seen in the growing area of e-commerce based on near-field communications (NFC) technology. The tie-up will embed SPD’s financial services directly into SIM cards used by China Mobile subscribers, allowing them to pay for a wide array of goods and services directly from their mobile phones. (Chinese article)
Rather than using the Internet to transmit information, the new tie-up relies on NFC technology, which allows transactions to be conducted using short-distance communications like infrared and Bluetooth. Thus, for example, the technology would allow someone to pay for products in a store directly using his or her mobile phone. People could also buy products from vending machines using their phones, eliminating the need for cash.
This tie-up looks especially potent because it combines China Mobile, the nation’s dominant mobile carrier, with one of the country’s more entrepreneurial banks. China Mobile now has more than 700 million users, or around two-thirds of all mobile customers in China, while SPD counts the entrepreneurial Silicon Valley Bank among its foreign partners. Obviously it will take some time for consumers and vendors to adopt this new technology, but I would expect we could see some exciting results in the next 2 years.
In the other big news, Sina has announced it is preparing to launch an online bank called Wei Yinhang, which translates to Micro Bank, on its Weibo platform. (English article) Rather than act as an independent bank, Wei Yinhang will serve as a platform for other commercial banks to offer services over Sina Weibo. Users of the service will be able to conduct a range of transactions, including opening accounts, transferring funds and making wire payments.
The roll-out of Sina’s new service comes just months after Internet giant Tencent (HKEx: 700) launched a similar partnership with China Merchants Bank (HKEx: 3968; Shanghai: 600036) on Tencent’s popular WeChat mobile instant messaging platform. (previous post) The pair launched the tie-up in May with basic services like balance inquiry, and expanded it this month with more advanced services such as money transfers.
Adding to the heating competition, China is expected to award its first online payment licenses for foreign companies by the end of this year, with eBay’s (Nasdaq: EBAY) popular PayPal service aiming to become one of the first to enter the field. Look for more of these online and mobile banking and financial services to be launched in the months ahead, as both domestic and foreign companies vie for a piece of a sector likely to see explosive growth in the next decade.
Bottom line: New mobile and online financial services from SPD, China Mobile and Sina reflect a coming explosion in such services driven by the rapid rise of e-commerce.
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