Closer Look: Jingdong Gives Alibaba Some Company in Financial Industry
(Beijing) – The country's second-largest e-commerce company, Jingdong Mall, is following its big rival into the financial industry.
Jingdong may be a latecomer to the competition, but its ambitions are no less aggressive than Alibaba's. It has less expertise and experience running an e-shopping website and third-party payment services than Alibaba, but it has an edge in logistics management.
The difference explains why Jingdong did not start with wealth management services for individual online shoppers the way Alibaba did when it set out to explore Internet finance as a new driver for growth. Instead, it targeted the logistics chain.
Its latest move to empower suppliers is a financing tool called Jing Bao Bei. The service is open to suppliers that have contracts of at least three months with Jingdong. It allows qualified borrowers to receive loans in less than three minutes.
Decisions are made based on the borrowers' creditworthiness. Transaction records with Jingdong are used to determine this. No collateral or loan guarantees are required. As a borrower's credit ranking improves, the credit line can expand.
Most loans must be repaid in up to 90 days at an annualized cost that equates to 10 percent of the loan. This includes interest and a commission fee charged by Jingdong, said Wang Lin, a director of the company's financial arm.
She said Jing Bao Bei has been warmly received. The first day it was put online, a loan agreement worth 300,000 yuan was signed. More than 50 other suppliers have shown interest, she said.
This is hardly surprising, given the common desire among commodity suppliers to use capital more efficiently. Chinese suppliers are expected to sell things on credit, which amounts to making loans to buyers. It may take up to several months to get payment. This puts a financial strain on capital-weak suppliers.
This is the second financing service Jingdong has rolled out to its suppliers. In the past it has cooperated with banks to streamline procedures for suppliers to get loans. Starting in October, a Jingdong supplier could ask the company to verify its account receivables and use this to borrow from a cooperating bank much more quickly than usual. The service had facilitated loans worth more than 8 billion yuan as of November 30.
Under the arrangement, the bank provides the loan and decides the lending interest rate.
With Jing Bao Bei, however, Jingdong makes the call. The service is restricted to suppliers on its online store. In the future, it could be broadened to include companies that sell things on its website in loose cooperation with Jingdong.
The ultimate goal is to make loans to the public. There were also talks about taking outside investment to make loans.
Jindong received a small-loan license in September. It has established a subsidiary to operate the business.
It also holds licenses for third-party payment and investment funds sales, said Liu Changhong, another director of the company's financial exploration department.
Third-party payment is where Alibaba's Alipay excels, but Liu said Jingdong is confident it can gain ground in this area. It has prided itself on permitting payment on delivery, but a large percentage of transactions are still settled online. That should serve as a foundation for developing third-party payment services.
Jingdong has also made deals with several fund companies to sell their products online, Liu said. As soon as the securities regulator gives the nod, it will launch those products.
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