Internet leaders, be they social networks, e-businesses or simple apps, are moving increasingly into areas that were previously the preserve of traditional banking services.
MyBank, the online banking arm of e-commerce colossus Alibaba, began operating in China. Alibaba wants to compete for small clients, for operations that are not profitable enough for traditional banks. Hence it’s positioning itself between banks and startups that offer peer-to-peer loans.
Alibaba is already a major competitor in the finance industry. For some months now it has had an agreement with the LendingClub, a P2P loans platform, to offer funding to US firms that buy through Alibaba. It also has its own smartphone payment system, and one of the biggest investment funds in the world in terms of capital.
What is happening in China is a good indicator of how non-traditional players can enter the banking sector on the back of their flexibility and their position in the smartphone world.
The other key player in the sector is WeChat, a smartphone messaging app similar to WhatsApp that belongs to a telecommunications company. Similar, but of course with more to offer. It’s the equivalent of Facebook for smartphones and is very popular among young people. If you don’t have it, you’re nobody.
It even provides payment solutions, does taxi or restaurant bookings and all sorts of purchases. And in January of this year WeBank came on the scene. It makes everything simple and easy for the user, with extremely low commissions and a major social component.
Both of these examples provide us with clues to the plans of action of some of the best known players. If we take a look at WeChat you don’t have to be a genius to see how Messenger is going to evolve. Facebook already lets us use it without the message appearing on the social network, and as from a few months ago it can be used to make P2P payments. WhatsApp is more of the same. Apple Pay has just started up and is positioned as the most widely used app of its kind.
None of these examples have offices, none are complex to use, and all have a social and smartphone component. It’s time to ask traditional banks what they are doing to look more like the bank of Alibaba.
Ricardo Pérez. Professor. IE Business School, http://www.ie.edu