MYBank, an online-only private bank, is facing challenges from Chinese regulators for risk concerns of its facial-recognition technology. (Photo : www.en.xinfinance.com)
The launch of MYBank, an online-only private bank owned by Ant Financial Services Group, a financial affiliate of Chinese e-commerce giant Alibaba Group Holding Ltd., will be postponed for a later date this month, as government regulators are challenging the bank’s asset-light operation which does not require physical branches.
The Wall Street Journal reported that the problem lies on the facial-recognition technology being introduced by the bank, which would enable people to open accounts without the need to be verified in person. Through the use of facial-recognition technology, the bank would only authenticate users based on photos of their faces taken with smartphones, and the photos will be checked against police databases of identification cards.
Experts said that the method is not used in any other banking system, and China's central bank and the police ministry are concerned about the security risks that the technology may present.
According to Chinese regulators, bank accounts can only be opened in person and opening an account remotely is still not allowed. Although MYBank has already been issued a banking license, its ability is only limited to receiving deposits and issuing loans.
MYBank Vice President Zhao Weixing said on June 12, Friday, that the bank would proceed with its plans and is currently discussing with other banks on opportunities to cooperate.
"We need a system of [bank] accounts because it provides the soil for cash management of small and micro enterprises and customers," Zhao was quoted as saying. "But if today there is no account system, we will not stop. We must still continue on the road we have previously walked."
China is slowly opening up the banking sector to greater competition, and allowing companies like Ant Financial to set up their own banks could give small and private businesses more opportunities for loans, which is key for the country's future growth.
The country's big banks, however, still favor state-owned enterprises, which they see as less risky than private banks, especially in a slowing economy.
The approvals in the banking sector had been seen as a way for the online banks to collect deposits and would enable Alibaba and its rival, Tencent Holdings Ltd., to further get involved into financial services.
Tencent has its own version of facial-recognition technology, launched by its private bank, WeBank, in January.
