Can private banks survive and thrive?

"We have made an effort to streamline our services so that customers won't feel the lending process is stalled in any way," said Webank's deputy governor Huang Liming.

"Alibaba's online commerce platform was able to handle 30,000 deals per second during the November 11 shopping spree of last year. The success can be replicated in MYbank," said MYbank's deputy governor Zhao Weixing.

"MYbank is the first Chinese bank that's completely operated on a Cloud System, which ensures efficiency and lowers cost," Zhao said.

Webank and MYbank have both ruled out the establishment of bricks-and-mortar branch offices. Other three private banks said they would incorporate the concept of the "Intelligent Bank" to their limited number of actual offices.

"We will fully use our advantage of being familiar with SMEs and their financing needs," said Xu Zhiwu, vice president of Wenzhou-based Minshang Bank. The bank offers loans with a rate of around 8 percent, lower than the rate of other local lenders.

Challenges ahead

Despite the banks' allure of better service and lower charges, several obstacles remain.

As the government has repeatedly cut interest rates and recently expanded the upper limit of the floating band of deposit rates to 1.5 times the benchmark from the previous 1.3 times, competition among banks for deposits has grown stiff.

Gone are the days when the banks could earn quick and big. Profit in the Chinese banking sector has slid from 30 percent four years ago to 5 percent in the first quarter of the year. Even state banks have to fight for a living.

Registered capital of the five private banks is tiny, with MYbank's 4 billion yuan being the most and Minshang Bank 2 billion the least. With such a limited capital, whether they can ensure sustainable development begs question.

Oversight on private banks for its healthy growth is also an outstanding issue.

"The existing rules are designed for the supervision of traditional banks, which are likely to be inapplicable to private lenders," said Chen Tie, investment director of Fosun Group, MYbank's shareholder.

"Technologies such as accurate facial recognition and tailored industry standards have to be there to make private bank's service of opening an account online safe," said Pan Shuangwen, an official at the People's Bank of China, the central bank.

"We must have patience in developing private banks," said Nan Cunhui, president of Minshang Bank.

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