The battle will play out entirely online: The banks aren’t planning any warehousing of inventory, leaving that to the merchants. MYbank and Tencent Holdings Ltd.’s online WeBank, which launched in December, plan no physical branches.

WeBank started its consumer lending in May, where borrowers without collateral can get as much as 200,000 yuan at an annualized rate of 18 percent.

MYbank is to begin operating on Thursday as part of Alibaba’s finance arm, Zhejiang Ant Small & Micro Financial Services Group Co. It’s one of a wave of new private banks being licensed by the government to target small loans and aims to use facial-recognition software to let users set up accounts.

Alibaba already has expanded into e-finance, with its Alipay payments system and Yu’E Bao money-market fund.

“The potential of web-based services, be it financial or retail, is huge in China, so it’s not too late to join the game,” said Wang Weidong, an analyst at Internet consultancy iResearch in Beijing.

Eoin Treacy's view

Established banks have been hamstrung by strict rules on deposit and lending rates that upstarts like Alibaba and more recently Tencent have been able to circumvent. This has allowed a new type of bank to develop online where savers are offered highly attractive rates. So far regulators have not ruled on the legitimacy of their money market funds which has allowed them to proliferate. Since major banks are precluded from this new business line they are trying to hit online merchants’ where it hurts i.e. retail sales.

China is not the only place where technology companies are acquiring banking licences. Apple’s Apple Pay is a first foray into payments. Facebook, Google and Amazon have also made noises about acquiring banking licences.  Considering how the online banking experience is often hampered by the internal restrictions imposed by bank bureaucracy and regulatory commitments, there is a definitely room for innovation in this sector not least in payments and transfers.

Alibaba’s US listing does not include its finance arm so will not reflect the growth of its banking business. There has been talk about it listing the finance arm separately but it hasn’t happened yet.

Tencent remains in a steep but consistent medium-term uptrend. It rallied impressively today to confirm at least short-term support in the region of HK$150 and a sustained move below the 200-day MA would be required to question medium-term scope for additional upside.

Meanwhile the mainland banking sector continues to find support in the region of the January high and a sustained move below the MA would be required to question medium-term recovery potential.