Technology can drive traditional banks to reform, claimed Chinese premier Li Keqiang at the launch of China’s first online-only bank, WeBank.
Created by a group led by gaming and social networking firm Tencent Holdings, WeBank is the first private bank to begin an online-only pilot. It follows the Chinese banking regulator granting licences to six companies in 2014.
A financial affiliate of e-commerce giant Alibaba has also been granted a licence by the regulator. Tencent and Alibaba will reportedly use big data to analyse huge amounts of user information to evaluate the credit risk of small borrowers.
According to reports at the opening ceremony of the bank, the Chinese premier said the new banks will force existing banks to change.
“We will lower costs for and deliver practical benefits to small clients, while forcing traditional financial institutions to accelerate reforms,” he said.
Reform is likely to come through competition with new banks extending services to more people and traditional banks improving the services they offer.
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In the UK, the arrival of new banks harnessing new technology to challenge the established players is expected to lead to industry-wide reform and not just speed the adoption of new technology at traditional banks.
IT giants such as Facebook and Google are beginning to offer financial services aroud information enhancement, while online-only Charter Savings Bank has recently been awarded a UK banking licence.
It has also been claimed German Web 2.0 and social media-based bank Fidor Bank is close to launching in the UK, as the UK regulator seeks to increase competition in the retail banking sector.
Other digital banks that have recently applied for UK banking licences include Atom and Starling.
In 2013 the Payments Council introduced a service to make it easier to change current accounts. The service means it only takes seven days to switch current account provider rather than the 30 days it used to take.
Take-up has been slow so far because consumers see little choice in the banking sector due to a lack of differentiation. But the arrival of new banks could lead to increased use of the seven-day, account-switching service.