Online service to gain more ground in financial market (3)

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A blow to banks?

Several industry watchers contacted by the Global Times on Tuesday said online companies and commercial banks are likely to initiate fierce competition in the financial service market.

"Competition in various fields such as payment services and product sales is definitely going to happen," Wang Weidong, an analyst with iResearch, told the Global Times Tuesday.

Zhao echoed Wang, saying that the traditional services that banks offer, such as money orders and checks, will receive a hard blow from online financial services providers.

"Web-based payment and money transfer is a definite trend, considering the popularity of online shopping and the digital nature of money," Zhao said. "So banks have to compete with Internet companies in this field in order to survive."

It is too early to say who might win the competition in the future, but both sides have their clear advantages, he noted.

"While online companies such as Alibaba have huge customer base, they lack the risk and safety management capabilities that banks possess," Zhao said.

However, several bank executives were quoted in the Economy & Nation Weekly magazine as saying that the competition is not fair.

"If we want to develop a product, we need to get approvals from the central bank as well as the China Banking Regulatory Commission (CBRC). By the time we have gone through all the procedures, Internet firms may have already launched a similar product," a banking industry insider told the magazine.

Liu Shiyu, deputy governor of the People's Bank of China, said on Tuesday that online financial services have created challenges for regulating the financial industry, Beijing News reported Wednesday.

"There have been some ethical problems in the P2P platforms, and the public should be aware of its operation and credibility risks," Liu said.

A CBRC staff member said that the regulator is aware of the risks that the Internet might bring to the financial industry, and it will regulate Internet financial services providers in terms of their operation, management and organizational policies, the magazine reported.

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