The Bank of East Asia Ltd (BEA) plans to launch online microcredit personal unsecured loans on the mainland in cooperation with Shenzhen-based WeBank - an Internet bank backed by Tencent Holdings.

The project is expected to offer loans averaging 30,000 yuan ($4,830.8) for a period of less than one year.

If approved by mainland regulators, it will become the first Internet finance service with cross-border bank participation.

BEA China teamed up with Webank - the Chinese mainland's first Internet bank - on April 16, promising to cooperate in mutual client recommendation, credit card, microcredit and personal loans, wealth management and Internet finance business.

As Internet financing is booming on the mainland, economists say such cooperation is an innovation, but they are concerned that the product's market would be limited.

According to a Hong Kong newspaper, BEA will be responsible for loans credit and funding, while WeBank, which opened in January and does not have any physical outlets, will provide the product to clients through its platforms.

They will also establish a model for credit checks, based on which the defective rate of personal loans is estimated at 4 to 5 percent.

Ouyang Liangyi, associate professor at the Peking University HSBC Business School in Shenzhen, told China Daily: "Tencent didn't accumulate much resourse in finance talents or loan credit review, so it needs to make use of BEA's experience in loan review."

Zeng Guang, secretary-general of the Shenzhen Internet Finance Association, agreed: "It's an innovative and win-win cooperation for both sides."

"BEA's advantage is its international trading services, which can help WeBank explore cross-border business. In return, WeBank can help BEA develop mainland personal-loan products, an area in which BEA is relatively weak."

In May, WeBank launched its first product, "Weilidai", providing microcredit to users without the need for guarantees or collateral.

So far, it has extended more than 800 million yuan in microcredit to consumers, the lender said on Monday.

The loans were made on Tencent's QQ, a popular online instant messaging tool. QQ users can get up to 200,000 yuan in credit with a daily interest rate of 0.05 percent.

QQ has about 832 million active accounts, while WeChat, another popular mobile messaging app also developed by Tencent, had about 549 million accounts by the end of March.

Tencent said "Weilidai" has been extended to hundreds and thousands of QQ users, but it declined to reveal the exact figure.

Experts are worried that the upcoming product will not enjoy a market as large as that of it rival Alibaba Group.

Chinese mainland e-commerce giant Alibaba Group launched Ant Financial Service Group last year, targeting small- and micro-sized companies and individual consumers.

"Most large international Internet banks, such as Australia-based ING Direct, focus on secured loans. Tencent's choice of unsecured loans is to compete with Alibaba," said Ouyang.

"Alibaba has Alipay, a third-party online payment platform, and other systems to guarantee financial safety, but Tencent doesn't have such a strong base," he added.

According to Analysys International, Alipay accounted for about 60 percent of the mainland's third-party Internet payment market in 2012, while Tencent's Tenpay accounts for less than 18 percent.

Alibaba launched "Jiebei" in April, providing loans of between 1,000 and 50,000 yuan for a period of 12 months, with a daily interest rate of 0.045 percent.

"BEA has relatively less unsecured personal loan business on the mainland, so the capacity of the product's market is limited," Ouyang said.

The most difficult problem, he believes, is how to open accounts with an online bank.

According to central bank regulations, whoever wants to open a renminbi bank account needs to appear at the bank counters, but Internet banks do not have any physical outlets.

In January, WeBank tried to open long-distance accounts with face recognition technology by issuing loans of up to 35,000 yuan for drivers, but did not continue after an investigation by the central bank and the Public Security Bureau.

"It is just not reasonable to require Internet bank users to go to Shenzhen just to open an account," said Ouyang.

To steer away from such regulations, users are asked to use their Tenpay account when applying for a loan through "Weilidai". Tenpay is an integrated payment platform launched by Tencent to meet the needs of its QQ users.

Tenpay account registration is bound with a bank card in line with regulations.

Alibaba's affiliate firm Ant Financial, which opened its own Internet bank named MYbank in June, also faces the same dilemma.

grace@chinadailyhk.com

According to mainland regulations, whoever wants to open a renminbi bank account needs to appear at the bank counters, but Internet banks like Tencent's WeBank and Alibaba's MYbank do not have any physical outlets. Asia News Photo

(HK Edition 07/29/2015 page8)