When a mobile operator buys itself a bank…

What do you do when you have more than USD 30 billion cash in your hands?

Faced with the question China Mobile, the world’s biggest mobile operator by subscribers (500 million+), decided to buy itself a 20% stake in the Shanghai Pudong Development Bank (SPDB).  Why? Well, for a starter, competition has started hurting China Mobile’s profitability. As a result, the firm is looking for growth in other segments, including acquisition of operators abroad.

More importantly, and despite notable improvements, e-banking and m-banking remain under-developed in China. SPDB’s national banking license and expertise in clearing and settlements coupled with China Mobile’s large subscriber base provide an interesting synergy to develop mobile banking services – electronic bill payments, electronic money transfers as well as mobile credit cards – in China.

Whether SPDB has the critical reach (8 million customers) remains questionnable. But maybe that’s exactly what the operator was looking for: a medium-sized bank that can be turned into an “in-house banking platform”.