Media Center

Position:Home > Media Center > Financial Information > Financial – CITIC transforming to internet finance, “two Ma” butting in banking environment – Reapal

Financial – CITIC transforming to internet finance, “two Ma” butting in banking environment – Reapal

The rumors of China CITIC Bank with two internet giants Tencent and Alibaba have eventually been proved to be true. On March 11th, the two competitors Wechat and Alipay announced to collaborate with the same bank – China CITIC Bank – to carry out the internet credit card business almost at the same time.

On March 12th, stimulated by this favorable news, a full gap up of China CITIC Bank shares occurred in morning trading, and the opening price once approached the raising limit of RMB5.47 and then experience shock drop. As of the closing stage, CITIC Bank share was still brought to the limit-up position.

Early in mid-February this year, due to the rumors of cooperation with Alibaba, China CITIC Bank shares have soared, and become “bellwether” of the banking sector. At that time, though CITIC Bank has denied a shareholding relationship with Alibaba, but nothing was mentioned about Tencent in its announcement. Now it seems that the layout of CITIC Bank in the internet financial field has come true.

In this regard, the analyst Zhang Guangwen of Guangzheng Hang Seng said that although the internet does not create new values, it can optimize the traditional values in aspects of efficiency and business process, result in the traditional industry giants being subverted by internet giants.

“Cooperation with Tencent and Alibaba is the core logic to support the share price of CITIC Bank, and its first-mover advantage is no doubt.” a banking analyst said that day, “Previously, the CITIC Bank’s traditional businesses were once suppressed by CIB and CMBC successively, but now turned to promote its rapid reform. Should CITIC Bank have considerable expansion in the direction of the virtual credit card, the weakness of the retail business would be improved.””

CITIC preemptive enclosure

“Now, Alibaba is marketing the cell phone payment, such as the promotional activities at the Guangzhou subway station. Coupled with the official reply to the private bank formation application of Alibaba, the payment modes for personal small-amount consumption will turn to cell phone payment. Therefore, if these traditional banks are not bound to internet heavyweights, they will lose corresponding market shares. CITIC Bank has a swift response, and has preemptively hugged the ‘legs’ of Tencent and Alibaba.” Zhang Guangwen expressed bluntly in this regard.

Zhang Guangwen said, the reason for that the two internet giants chose to cooperate with China CITIC Bank is nothing but its banking license. Currently, both of the two internet giants have no banking licenses, but considering that only banks can grant credit cards, so it contributed to the cooperation between the two parties. Meanwhile, CITIC Bank is also endowed with one more credit card sales channel.

And analyst Qiu Guanhua of Guotai Junan Securities said that a credit card revolution led by the internet is coming and the first bunch of cooperative internet companies, commercial banks and internet insurance companies are expected to open a new internet profit model.

The analyst Xu Minmin of Essence Securities argued that the low credit limit is the core of internet credit cards, because it covers a relatively blank existing in the financial sector.

“Because the credit card limit is relatively low, the clients will become extremely insensitive to the overdraft interest rates (Only RMB15 is incurred per month as revolving interests even at an annual rate of 20% as to RMB1000), and it will be easier for clients to form an overdraft habits.” Xu Minmin said, “For the banks, against the physical card background, as this part of the market is still a low-coverage and blank field, and therefore its low cost makes the bank covering the clients of low credit limit become economically feasible.”

At the same time, the revolving loans of credit cards will also bring about considerable interest income to the bank. Up to now, the bank revenues brought in by the credit card business are broadly divided into three sectors: interest income of revolving loans (accounting for about 50%, and more than 18% annualized rate), commission income of payment by installments, and rebate income.

In addition, Qiu Guanhua also said that the combination of off-line internet credit card and two-dimensional code payment will overturn the traditional credit-card consumption by POS machines, and will improve the payment efficiency. For example, through cooperation between CITIC and the two internet giants Tencent and Alibaba, the latter ones are allowed to provide massive users, data resources and the most advanced IT technical support for the internet credit card business.

In the view of Qiu Guanhua, CITIC Bank, as a starter, will not only obtain the earliest advertising, but also gain access to lots of newly increased retail customers. Especially after the cooperation of both parties in the joint launch of two-dimensional code dedicated terminals to an entity merchant, it will increase the traditional credit card charges for the cooperative banks as an “acquirer” provided that the two-dimensional code terminal is integrated with the common functions as POS machines at the same time.

“This means that the off-line two-dimensional code acquiring business will break the monopoly of UnionPay, and the first cooperative bank is expected to obtain substantial credit card charges.” Qiu Guanhua argued.

The credit card users will exceed 600 million?

Exactly on the same day that Tencent and Alibaba announced to launch the internet credit card business, these two giants, as sponsors, appeared in the list first batch of five pilot private banks. Previously, Alibaba and Tencent have already set up small loan companies, in order to offer the credit services business for the platform users. And the establishment of private banks means the deposit taking can be realized, and thus forming a more complete financial chain.

Similarly, Tencent’s launch of internet credit card is also considered from the perspective of the enterprise strategy. “What Tencent wants is to rapidly develop the products and promote the creation of Wechat industry chain. If the credit card + micro-pos machine + public comment and many other scenarios have formed a consumption closed-loop, in theory, it will be able to basically subvert the credit card business of traditional banks.” Zhang Guangwen said, “Previously, the Wechat commerce platform once had a similarly close cooperation with CMB, such as balance inquiries through Wechat, etc. However, the cooperation this time increases the diversity of cooperation between the internet and banks. It begins to penetrate deeper to the internet finance sector.”

Qiu Guanhua believes that as to the e-commerce companies, the internet credit card and two-dimensional code payment weakens the boundary between online and offline payments, and also hastens the birth of a new business mode of O2O (Online to offline, online + offline). In other words, the two-dimensional code payment information can be generated for merchants whether they are online or offline; and payment by scanning two-dimensional codes with cell phones is allowed for consumers whether they are online or offline.

“Because the issuing and use of the internet credit cards are free from geographical and time constraints, it is likely to push forward a leap from 150 million Chinese credit card users now to 600 million or more. Then, it may come true that everyone will have a consumer credit.” Qiu Guanhua said, “As long as being armed with smart phones, the social platform may collect and accurately converted the real-time, diversified, personalized and fragmented information in the instant messages into the credit value through big data technique.””