Are Tech Giants Phasing Out Banks?

‘Singles’ Day’ is one the most important days for online shopping. It’s a day when young Chinese are proud of their single status. And as a reward, they celebrate by buying themselves a gift.

During this year’s Singles’ Day, shoppers broke all records, spending more than $33 billion in 24 hours.

While the event is really for retailers, it’s commonly associated with Alibaba Group Holding Ltd [NYSE:BABA] who heavily promote their offerings during the day.

If you’re not familiar with the Chinese tech giant, they were first an ecommerce business. They would help Western businesses buy Chinese goods from manufacturers. Today, the company has its fingers in multiple pies.

From media and film production to instant messaging and healthcare, Alibaba does a little bit of everything. But one of their best businesses is Ant Financial, formally known as Alipay.

Easy credit no questions asked

Ant Financial provides loans and credit financing, much like a bank. During Singles’ Day this year, Ant Financial helped cash strapped millennials buy things, such as luxury handbags and overseas holidays.

As reported by Bloomberg:

They’ve made billions of dollars helping sell everything from iPhones to hairdryers on China’s burgeoning online shopping platforms. Now, tech giants led by Alibaba Group Holding Ltd.’s finance affiliate are making money off the loans consumers use to buy those products.

Amid surging demand from cash-strapped Chinese millennials, companies such as Ant Financial — controlled by Alibaba’s billionaire founder Jack Ma — have been extending more consumer loans.

And of course, it’s not just Alibaba that have dug out a niche to provide credit lending., Inc. [NASDAQ:AMZN] and Facebook, Inc. Common Stock [NASDAQ:FB] could also scale their ambitions for lending profits.

According to Bloomberg:

Almost half of banks and credit unions consider large tech companies such as Alphabet’s Google, Facebook and Apple to be a “significant threat,” according to a Infosys Finacle survey of 300 bankers released on Wednesday.

In China, tech companies such as Alibaba Group and Tencent Holdings have already emerged as serious competitors to banks in offering online financial services.

I suspect they’re scared of how tech companies might change traditional lending processes.

For example, Miuki Wang, a graduate student in Shanghai, got a 10,000 yuan loan for a trip to London this summer in a matter of seconds, all through an app on her smartphone. Ant Financial approved her request at 14.6% annual interest through its mobile-based lending service ‘Jiebei,’ which means ‘Just Borrow.’

I doubt this new form of small loans with no questions asked will phase out banking activities. However, it could seriously dint banking profitability going forward.


Härje Ronngard,

Junior Analyst, Markets & Money

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Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.

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