When e-commerce giants venture into the world of online banking, there are usually two potential outcomes. Either this venture is a complete failure, and the e-commerce giant takes a major financial hit. But in some cases, pushing ahead is the only option, and eventually, great things will happen. Tencent’s WeBank is firing on all cylinders, and their social messaging app WeChat is shaking up the remittance sector as we know it.
WeBank Looks at US$1bn In Funding
Setting up a new competitor in the tightly crowded online banking industry sounds doable on paper, but the reality is much harsher than that. Such an operation requires a ton of money, most of which is spent on lawyers and regulatory requirements. Also, staff members will have to be available around the clock, as there are no physical offices where customers can get help for their banking needs.
When Tencent announced their WeBank venture, a lot of people assumed the project was doomed before it could even take off. Truth be told, the idea of creating an online bank to compete with the People’s Bank of China – among others- sounded a bit farfetched. But over time, it became clear that a book should not be judged by it’s cover, and certainly not the book of online banking in China.
Multiple players are looking to venture into the world of Chinese online banking, as Baidu – the Chinese search engine – and China Citic are planning to pump 2 billion yuan into a joint venture. As you may have guessed by now, this joint venture would be aimed at launching a new Internet bank in China, called Baixin Bank.
But having this venture well-funded will not guarantee its chances of success. Baixin Bank might be an online bank, but that doesn’t mean the venture is not controlled by the Chinese government. To make matters even more intriguing, China Citic is already owned by the Chinese government as we speak.
It will be interesting to see whether or not this venture brings forth any form of banking innovation, but the outlook is grimmer than most people had anticipated. Maybe WeBank can bring something different to the table although it’s difficult to imagine the Chinese government will have no say in the matter.
WeChat Partners With Western Union
Tencent may be a multitude of things, but the company is not backing down from a fight by any means. Not only is the company – allegedly – in talks with private equity investors to establish a US$1bn – yes, with a B – funding for their online banking venture, but its social messaging App WeChat partnered with Western Union in recent weeks.
As a result of this partnership between WeChat and Western Union, users of the app can now send money around the world – or to roughly 200 countries at last – by using the WU Connect platform. Even though WeChat might not be the first social app to launch cross-border payments through social media, it is in a prime position to become the market leader in this sector very soon.
“Given the proliferation of social media around the world, we are expanding our activities in this exciting area. It only makes sense to include the WeChat platform as part of the company’s innovative digital money transfer capabilities.” – Western Union CEO Hikmet Ersek stated.
It is important to note the remittance functionality for WeChat is currently available in the United States, as this is the only country where WU Connect is in operation. A rollout to additional countries is planned for the near future, although there are no details regarding which countries will be next on the list.
What are your thoughts on WeBank and the WeChat partnership with Western Union? Does either sound like it has potential in your opinion? Let us know in the comments below!
Header image courtesy of Tencent