China's PICC gets approval to set up online payment firm

BEIJING (Reuters) - A unit of People's Insurance Company of China Co (PICC), one of China's biggest insurers, has received regulatory approval to set up a third-party payment firm, challenging banks for control of the crucial market. The China Insurance Regulatory Commission said on Monday it granted PICC Life Insurance Co permission to invest 200 million yuan ($32.3 million) to establish a wholly-owned subsidiary, Beijing Baofutong Ltd, according to an online notice posted by the insurance regulator. The PICC unit still requires to get approval from the central bank and comply with legal procedures to set up a third-party payment service, the notice said. "Each year we pay a substantial amount to third-parties as customers buy and pay for insurance products through banks," said a PICC spokesman. Chinese companies across businesses have been accelerating their push into online finance, a booming sector that is encroaching upon banks' traditional territory. For insurers, which have relied on banks to sell their products, the cost savings could be substantial. Internet firms, led by the financial services arm of e-commerce powerhouse Alibaba Group Holding Ltd and social networking giant Tencent Holding Ltd, are among the most aggressive entrants in the new market, offering a host of online services such as banking, loans and credit, insurance, payment systems and investment. Alipay, run by Alibaba-affiliated Ant Financial, controls a leading stake in the online payments market. Tencent's online-only bank started trial operations in January. Ant will launch its planned internet bank in June. Premier Li Keqiang has promoted the greater use of online finance to help lower borrowing costs for small and medium businesses and push traditional financial institutions to accelerate reforms. Challenged by newcomers, Industrial and Commercial Bank of China, the world's largest lender by assets, last month started its online "e-ICBC" platform, which integrates services including payment, e-commerce and wealth management. ($1 = 6.2007 Chinese yuan renminbi) (Reporting By Beijing Newsroom; Editing by Matthew Miller and Gopakumar Warrier)