Alibaba-affiliated Internet bank to rely on non-US tech

[BEIJING] The Internet bank affiliate of China's Alibaba Group Holding Ltd on Friday touted its in-house cloud computing system as an alternative to the US technology that the government wants to purge from the domestic financial sector.

The new technology systems of soon-to-launch MYbank would avoid products from IBM Corp, Oracle Corp and EMC Corp, according to a presentation by Tang Jiacai, the bank's chief information officer.

The detail is an example of how Alibaba and its affiliate Ant Financial Services Group, which part-owns MYbank, often march in lockstep with government policy.

Beijing has become increasingly wary of foreign technology and has actively promoted the weaning of the financial sector off of IBM, Oracle and EMC systems, which form the network backbone for much of China's finance sector. The process has been dubbed "IOE out", or "de-IOE", after the first letters of the three companies' names.

"The innovative technology (discussed) today promotes the development of all Internet finance," said Deputy Governor of MYbank Zhao Weixing, noting this kind of "de-IOE" cloud banking system was a first.

MYbank executives said being cloud-based would reduce the bank's technology costs and allow it to make cheaper loans.

Forrester senior analyst Charlie Dai said MYbank's deployment of non-IOE technology would be a meaningful gesture, particularly after China's banking regulator recently nixed cyber security rules after domestic banks were unwilling to migrate off of foreign technology products.

"It's a big step if they can prove it's viable to drop IOE from core banking functions, not just non-mission critical operations," Mr Dai said.

MYbank is widely expected to launch this month, although executives declined to specify when.

The "IOE out" characteristic was just one of many features Tang highlighted in a presentation, in which he discussed the benefits of having an in-house, cloud computing network.

The government has pushed for domestic industries, especially in key sectors such as finance, to drop foreign-made technology, particularly from the United States. This came after former National Security Agency contractor Edward Snowden disclosed that US spy agencies planted code in American tech exports to snoop on overseas targets.

Analysts have said China's efforts to protect itself and sensitive information from potential vulnerabilities in foreign-made technology are perfectly reasonable.

But using different, newer technology carries its own risks, as they have neither the technical nor security pedigree of products from the likes of IBM, Oracle and EMC.

Forrester's Mr Dai said traditional banks may be more reluctant to follow MYbank's lead.

Many Chinese technology companies said they have years to go before catching up with their US peers, especially in terms of data security.

REUTERS