Tencent’s WeBank Finds Sweet Spot in Microloans in China

Wednesday, July 29, 2015

Seven months after its launch, Tencent-backed (00700.HK) WeBank is showing off some of its first financial accomplishments that hint at the direction it may take as it carves out a place in China’s banking sector.

The numbers reveal that the bank, the first to launch under a private-sector pilot program by Beijing, is setting its sights on providing credit to small businesses and consumers.

The tack looks like a direct challenge to traditional credit card issuers, and could ultimately provide consumers with yet another payment option in both the online and offline worlds.

Tencent’s initial focus on this kind of credit isn’t difficult to understand, since Beijing has placed numerous restrictions on what exactly WeBank can do, following its launch in January.

At least at the outset, WeBank and rival banks being set up by Alibaba (BABA.US) and others won’t be allowed to accept deposits, which will limit their availability of funds to lend out.

They are also being forbidden from opening branches, which again limits their ability to meet customers and evaluate borrowers’ creditworthiness.

Lastly, they are being encouraged to focus on the small and medium-sized private business sector, which is traditionally underserved by big state-run banks.

Source: EJ Insight (link opens in a new window)