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Posted by Vanessa Zeng on March 27, 2014
Yuebao is a hot topic in China, and has even gotten international attention. But what is it? Yuebao is a value-added service that customers of Alipay (China’s version of PayPal) can use to earn interest and to make payments and transfers. An individual can start a Yuebao account with as little as RMB 1 (US$0.17).
The Alibaba Group launched Yuebao in June 2013. By mid-February 2014, 61 million people had invested money in Yuebao, and total fund skyrocketed to RMB 400 billion (US$65 billion) – making it the largest fund in China.
People are drawn to Yuebao because of its:
Other companies in China are following Alibaba’s lead. Baidu (the largest search engine) and Tencent (the largest IM and game provider) have both launched their own versions of Yuebao.
Internet financing offers consumers more choice and flexibility to money management, and the results are plain to see: In January 2014, the total savings in China’s banking system reached RMB 940 billion (US$154 billion).
What inspiration can traditional banks take from Yuebao?
Yuebao’s initial attractiveness may wane once the market matchesits interest rate, but the huge customer base will not disappear; Internet companies will find new ways to provide them with financial services. The traditional methods that banks have used will face tough challenges, and banks must shift their thinking to meet these challenges. I’m beginning to research the opportunities for and challenges to traditional financial institutions caused by emerging Internet finance on eCommerce platforms. Please stay tuned.
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