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Private digital-only lender eyes expansion into Australia

By Karl Wilson in Sydney | China Daily | Updated: 2019-02-14 09:38
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A logo of WeBank, China's first private and digital-only bank. [Photo/IC]

China's first private and digital-only bank, WeBank, is looking to expand into Australia where the banking sector is dominated by the "big four" banking groups.

The country already has a couple of digital operators, with more expected. National Australia Bank (NAB), Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia and Westpac said they welcome competition.

A spokesperson for the Australian Prudential Regulation Authority, the statutory authority that regulates the Australian financial services industry, told China Daily: "If WeBank wants to conduct banking business in Australia it would need to apply to APRA for authorization to do so."

Under the guidelines, foreign authorized deposit-taking institutions do not have to maintain capital in Australia. But foreign bank applicants "must satisfy APRA" that they are subject to adequate supervision in their home country and must have received consent from their home supervisor for establishing a banking operation in Australia.

"It should be noted that participants in the financial services industry in Australia are prohibited from using restricted terms such as 'bank' until such time as they are authorized to do so by APRA," the spokesperson added.

WeBank became China's first digital bank in December 2014 when it was granted a banking license. Valued at around $21 billion, WeBank is backed by one of the world's biggest internet companies Tencent, Shenzhen Baiyeyuan Investment Co and Shenzhen Liye Group.

Tencent, with a market capitalization of $394 billion, has a 30 percent stake in WeBank. Tencent's market cap is about double the size of the "big four" Australian-based banks combined, according to a report by the Australian Financial Review on Jan 23. WeBank began laying the foundations for its digital-only banking venture with a flurry of trademark applications on Dec 5.

According to Adelaide-based legal firm KHQ Lawyers, WeBank is seeking to trademark the phrase "WeBank" and a series of Chinese characters that can be translated into English as "microloan", according to the report. KHQ would not make further comment.

In May last year, Volt was the first digital Australian bank to be granted a restricted license. Xinja was the second bank to do so, and its license was granted last month. Rivals 86400 and Judo Capital are expected to follow soon, adding to the competition in a concentrated market.

"The current healthy competition in Australian banking is evident in both the significant number of providers and the range of products available to customers," a spokesperson for Westpac told China Daily. There were over 100 lenders in the home loan market in Australia while there were many brokers, including online, to compare rates.

A report by the Guardian last year said the "big four" Australian banks together control just over 80 percent of all owner occupier home loans and 85 percent of all investor housing loans.

"We believe it is important that new participants can enter the sector, however it needs to be supported by a strong consumer protection framework," the Westpac spokesperson said. "As custodians of the economy's money, banks need to be strong and regulated appropriately."

NAB Chief Customer Experience Officer Rachel Slade said the bank welcomes competition. "Because ultimately customers are the beneficiaries," she said.

"A competitive, resilient and well-regulated financial industry is critical to Australia's ongoing economic stability and the growth of the broader economy."

TS Lim, head of research and banking analyst at Bell Potter Securities, said: "There's always room for a new entrant provided it is has a good track record and good funding sources.

"As a banking license comes with deposit guarantee, the regulators will want to satisfy themselves that there won't be a run on the bank," he said. The key is to get "scale quickly in a focus area."

A spokesperson from ANZ said: "We welcome the competition and realize smaller digital banks will be able to offer something different to certain customers. This sort of change is inevitable as part of a broader transition to a digital economy and we embrace the opportunities it brings."

According to the AFR, industry speculation suggests Tencent and WeBank are looking to ramp up operations in Australia quickly to offset the progress made by rival payments company Alipay.

Alipay was spun out of e-commerce company Alibaba, which is the same size as Tencent. Alipay is now held by private company Ant Financial, which has been valued at up to $150 billion.

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