• Alibaba founder and CEO Jack Ma attends the launching of Internet bank MYbank in the eastern city of Hangzhou.

Alibaba founder and CEO Jack Ma attends the launching of Internet bank MYbank in the eastern city of Hangzhou. (Photo : www.chinadaily.com.cn)

Alibaba Group Holding Ltd.'s financial affiliate, Ant Financial Services Group, has launched on June 25, Thursday, Internet bank MYbank, to cater to small- and medium-sized Chinese enterprises that have difficulties in obtaining credit from major financial institutions, according to a statement released by the company.

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The statement said that Ant Financial Services Group, which owns 20 percent of MYbank and has 4 billion yuan ($644 million) of registered capital, is ready to offer loans of up to 5 million yuan ($805,503).

A spokesperson for the Ant Financial told Reuters that the bank will only be able to take in deposits, but when its facial recognition technology is approved by regulators, it will allow customers to open bank accounts remotely.

"MYbank is here to give affordable loans for small and micro enterprises, and we are here to provide banking services, not for the rich, but for the little guys," said Eric Jing, executive chairman of MYbank.

MYbank is doing a similar move done by its Alibaba arch-rival Tencent Holdings Ltd., which started the trial operations of WeBank, China's first online bank in January.

Experts see that MYbank's target clientele has minimal threat to China's big state-owned lenders, whose deposits were taken away by Alibaba-related wealth management product Yuebao, now China's biggest money-market fund.

The Internet bank said that it is offering more competitive lower rates, compared to bigger banks since they have lower overheads from operating online.

SMEs continue to have tight credit conditions, despite a series of policies to ease bank rules, while banks continue to avoid companies affected by the economic slowdown. Some state-owned banks have also avoided small customers such as farmers and smaller enterprises due to difficulties in assessing their credit worthiness and they have little to present as collateral.

Though Ant Financial said that it will use its Sesame Credit arm to analyze data from its payment processing arm Alipay and Alibaba's e-commerce sites in order to evaluate the risk and price loans for MYbank customers, some analyst said MYbank would still face risks.

"The biggest risk for them is more than likely going to be credit costs, and will they be able to properly assess the risks?" Matthew Smith, a banks analyst at Macquarie, said.

"It's not clear, if they grow too aggressively, potentially the answer would be no," Smith added.