Influence Of Internet Finance On Deposits In Commercial Banks

In recent years, Internet enterprises vigorously march into the financial sector in China, infiltrate into Banks, funds, securities, insurance and other financial areas. As a result, Internet finance is changing the pattern of China’s financial sector.Innovative financial products pose a big threat to the monopoly of commercial Banks, "third-party payment+finance" product model, which Yu Ebao adopts, is the product from the fusion between traditional financial model and the Internet, it changed people’s consumption habits and financing manners and the operation mode of the merchants, which speed up the circulation of capital market.This paper choose Yu Ebao as the representative of the Internet financial innovation products, mainly because Yu Ebao is the first Internet money funds in China. Under the background of tight liquidity in the domestic capital market, Yu Ebao shows strong capacity of attracting currency. Its rapid growth rate quickly grabs the public’s attention, marked the beginning of the era of the Internet finance.Yu Ebao’s impact on commercial Banks mainly exists in the following aspects:First, elevate the cost of bank liabilities; Second, shunt bank customers. Traditional commercial Banks only attaches importance to high net worth clients, so the high threshold of wealth management products will often rejected microfinance from low-income groups; Third is the impact on traditional business model and profits source of commercial bank.The second part starts from the background and definition of Yu Ebao, then discusses its operation mode, profit mode, advantages and future predicament. First of all, Yu Ebao was collectively launched by Tianhong Asset Management and Alipay. By definition it is a money market fund. Alipay is China’s largest third-party payment platform which has more than eight hundred million registered users. Thus enable Yu Ebao to quickly attract those income-sensitive, mobility-sensitive and convenience-sensitive customers. Second, Yu Ebao hold some advantage due to the differentiation of product positioning.The analysis of the changes of Yu Ebao’s net asset and the declining earnings, suggest that Yu Ebao might encounter some bottlenecks in the future. First, unlike Banks with national credit guarantee, Yu Ebao lacks credit assurance, so it cannot attract large-scale, high-end capital; Secondly, during peak season in electric business platform, such as Christmas sales season, due to the sudden increase in trade volume, large amount of monetary funds will be passively redeemed in the short term, which poses a threat to the liquidity management. Once Yu Ebao’s capital scale up to a certain degree, it is difficult to deal with liquidity crisis with only Alipay’s credit advances. So Yu Ebao will need a large amount of provision money, which will definitely affect its earnings; Third, monetary fund earnings is highly correlated with financial market condition, due to its high volatility of earnings, Yu Ebao will lose customers who pursue money safety and profitability.In fact, since the beginning of 2014, when the banks launched new products in a bid to strike back, Yu Ebao’s yield rate showed a trend of falling. The central bank took on easy monetary policy which cut down interest rates, as a result, market liquidity improves. As ofMarch 2016, annualized yield rate of Yu Ebao has fallen to 2.55%. The fact that Yu Ebao’s yield rate was on constant decline led to customer dropout. This downward trend shows that Yu Ebao’s high-yield myth has become the past, in the future, Yu Ebao will be viewed only as idle fund management tool.The fourth part is mainly about the data and descriptive statistics analysis, which indicates Yu Ebao’s impact on commercial bank. First, discuss the correlation analysis between savings deposit change and Yu Ebao’s net asset change; Second, discuss the cause of this influence; Finally, it points out that this influence on commercial bank deposit is gradually shrinking. The main reason is our market interest rate rise back to normal level, as a result, Yu Ebao lost its competitive edge over saving deposit of commercial banks.At the end of this article, on the basis of summarizing the above conclusion, this paper points out the way forward for commercial Banks in the era of the Internet finance. For commercial Banks, the best way ahead is though collaboration with Internet Finance. Banks should be wise to keep up with the trend of Internet financial development to reform the traditional business model.