September 16, 2013 / 9:00 AM / in 4 years

UPDATE 1-Alibaba's Ma expands banking foray with China Minsheng tie-up

* Alibaba had tie-ups with CCB, Bank of China

* Alibaba has offered $16.34 bln loans since 2010

* AliPay has started offering money management products

By Elzio Barreto and Paul Carsten

HONG KONG/BEIJING, Sept 16 (Reuters) - Alibaba Group’s founder, Jack Ma, took another stab at shaking up China’s banking industry as the country’s largest e-commerce firm sealed a strategic pact with mid-sized lender China Minsheng Banking Corp Ltd to offer financial services.

Hangzhou-based Alibaba Group Holding Ltd, better known for its online platforms that resemble a mix of EBay Inc and Inc, has accelerated its move into China’s financial services sector in recent years to support businesses on its platforms.

Since 2010, Alibaba has been offering micro-loans and money management services with an aim of supplying more financing options to small and medium-sized enterprises that account for the bulk of its B2B platform.

“China’s finance industry, especially the banking industry, only serves 20 percent of clients. I see the 80 percent of businesses that have not been served,” Ma said in a People’s Daily article in June. “The financial industry needs someone to shake things up. It needs outsiders to come in and transform it.”

The tie-up with China Minsheng, the country’s seventh-largest listed bank, includes cooperating on wealth management and credit card businesses, direct banking and information technology, the lender said in a securities filing with the Hong Kong stock exchange on Monday.

Alibaba previously signed similar accords with other Chinese lenders including Bank of China and China Construction Bank Corp (CCB). It is not immediately clear if those agreements had expired or are still current.

The deal with China Minsheng comes as Alibaba is preparing for an up to $15 billion initial public offering either this year or the next.


While China’s state-run banking giants are taking note of Ma’s threats, they are not perturbed yet.

CCB President Zhang Jianguo told analysts last month that the bank is monitoring Alibaba’s expansion, but remains unconcerned about increased competition from the Internet company.

“I don’t think there is any chance for any outsider to come in and steal our position concerning traditional businesses, unless they offer something brand new,” Zhang said.

“Alibaba and a new batch of innovators, they have gone beyond tradition by hitting a number of areas, but it doesn’t mean we are lagging behind,” he added.

In 2010, Alibaba set up its loans business, offering credit to small businesses that used its e-commerce websites to sell their wares.

Alibaba has offered loans totalling 100 billion yuan ($16.34 billion) since starting the business, the company said in July. Since January this year, it has been offering credit internationally.

Alibaba’s AliPay payment system recently branched into offering money management products to users through Yu‘ebao, which means “leftover treasure” in Chinese.

This allows people to generate interest on money stored in their AliPay account by placing it in a money market fund.

Alibaba has partnered with 37 funds, but currently only one, Tianhong, is available on Yu‘ebao. Within 18 days of launching Yu‘ebao, the business already had 2.5 million customers with deposits of $1 billion.

Those forays into financial services have irked China’s conservative banking sector, and there has been backlash, analysts say.

In August, Alipay said it was shutting its offline point of sales (POS) service for small companies. China’s biggest third-party payment service provider said it had halted the service for “obvious reasons” and hinted at external pressure.

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