China’s largest search engine firm Baidu Inc. teamed up with state-owned Citic Bank Corp. to start an online payments bank aimed at the country’s $90 billion mobile payments business, according to local reports Tuesday.
Baidu, also known as China’s Google, declared its interest in the business even as the People's Bank of China reportedly debated stricter regulations on online payments in August, suggesting a spending cap of 5,000 yuan ($782) per day. The move triggered widespread public outcry in domestic media and popular Chinese micro blogs.
Chinese tech firms are vying hard for a share of the online payments market, which saw a 140 percent growth in transaction volume in the first quarter of 2015, excluding the services of Chinese banks and China UnionPay.
The sector, currently dominated by Alibaba Holdings Ltd. and Tencent Holdings Ltd., is expected to reach $1.9 trillion yuan ($297.5 billion) by the end of 2015, according to a Chinese analytics firm iResearch.
Apart from shopping, online payments firms also allow users to pay bills, invest in money markets, and transfer money to other users. Most of these firms offer loans to small companies and individuals.
However, these banks have run into regulatory roadblocks due to lack of physical locations required by regulators for certain services like opening bank accounts. Even after the Baidu-Citic joint venture is established, the new firm would still need to apply for a banking license, according to Reuters.