Chapter 8 Internet Finance

On January 4, 2015, the internet firm Tencent launched China's first internet-based bank “WeBank”. One of the five privately funded banks approved by China's central bank, PBOC, WeBank in Chinese suggests a bank for “micro and many”, reflecting its focus on ordinary individuals and small businesses and its linkage to the internet and social network. The ceremony was officiated by Premier Li Keqiang, and he pressed the “enter” button on a computer to send out the first loan of RMB35,000 ($5,400) by WeBank to a truck driver.

This first internet loan represented three important innovational aspects.

First, by providing microloans to the public, internet banks like WeBank addressed demands from individuals that were not adequately addressed by the existing financial system, with its focus on large companies.

Second, the internet bank conducted all operations online, so that the borrower did not need to go to an offline outlet to obtain the loan. WeBank first used Tencent's own version of facial recognition technology to verify the borrower's identity from a remote terminal; all of the loan processing was completed online.

Third, the creditworthiness of the borrower, the truck driver, was analyzed by utilizing big data technology, which effectively reduced the information asymmetry between the bank lender and the borrower. The driver was a member of a Tencent-invested logistics platform called Huo-che-bang (Truck Club), which links truck services with ...

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