The China Banking Regulatory Commission (CBRC)  has approved a pilot scheme allowing the setting up of five private banks, said Shang Fulin, president of the Commission, at the press conference of NPC & CPPCC 2014 Annual Sessions today. Tencent and Alibaba are the two Internet companies of the ten private investors who are allowed to participate in establishing the five banks.

Alibaba announced today its financial arm and Wanxiang Group have teamed up to apply for a license. Alibaba says the bank’s focus will be on small online businesses and entrepreneurs.

Alibaba’s financial arm, aka Alifinance, was built on top of Alipay, the online payment solution developed for Taobao marketplace. In the past years it created many innovative financial services for online retailers and users. Alifinance has been making small loans to online retailers on its marketplaces since 2010. In mid-2013 Alifinance launched a mutual fund Yuebao which immediately disrupted the mutual fund market in China that would have 49 million users on board half a year later. Alibaba aims to take advantage of the data of consumers’ and sellers on its platform for creating new financial products and better risk management.

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Tracey Xiang

Tracey Xiang is Beijing, China-based tech writer. Reach her at traceyxiang@gmail.com