China Internet titan Alibaba's foray into online financial services was once hailed as revolutionary for the mainland's banking sector, but now some analysts believe it's no longer particularly radical.
Yuebao, an online money market fund launched under Alibaba's wing, started last year amid predictions it would disrupt China's bricks-and-mortar banking business, partly through the usual e-commerce cost cuts from eliminating physical branches.
The fund quickly raised enough money to become the largest fund product on the mainland by offering rates much higher than the around 3 percent benchmark time-deposit rates at banks.
But some of the shine appears to be coming off.
"Returns keep falling and inflows keep moderating," despite Yuebao taking on more and more risk, CIMB said in a note dated Monday.
Inflows fell to around 33 billion yuan in the second quarter, down from a surge to 356 billion yuan in the first quarter and 130 billion yuan in the last quarter of 2013, it noted
Additionally, in an effort to pick up yield, Yuebao has shifted into longer duration investments, with more than 70 percent of assets now having a duration of more than 30 days, with 31 percent at more than 90 days, CIMB noted.
"The liabilities backing these assets are all day-money" that can be withdrawn at any time, creating "an enormous mismatch risk," CIMB said. "The fund is also becoming more of a shadow bank."
But these efforts aren't really helping the fund much, with the annualized return falling to 4.18 percent from its peak of 6.76 percent in January, while banks' wealth management products are currently yielding around 5.62 percent, CIMB said.
All of that means the expected sector disruption might not be all that disruptive.
"We continue to see very little threat to banks from on-line money market funds or, for that matter, the broader online financial services industry," CIMB said. "While we think that online players are here to stay, we also believe that they will increasingly bump up against institutional, regulatory and risk management constraints. In the meantime, banks are rapidly adapting."
Of course, some say the competitive moves by banks show Yuebao did disrupt the sector.
"The banking sector has also offered a similar product. Consumers are, one way or another, getting more options," Steve Wang, chief China economist at Reorient Financial, said. "It offers more competition. That's a revolution in itself."
Wang also noted that the timing mismatch risk is part of the nature of a money market fund.
"That's the way they operate," he said, noting there's been some regulatory discussion of whether the funds should need to set up a required reserve to handle withdrawals.
"Ultimately, the market and the users of these products decide what risk they are comfortable with," Wang said, adding he believes most investors understand the fund isn't guaranteed.
To be sure, some don't think Alibaba's foray will make much of a dent in China's banking sector.
"It's nice Alibaba had an innovative idea. It works," said Jim Antos, a bank analyst at Mizuho Securities Asia. "However, [comparing] the size of it as opposed to the massive size of the banking sector, it seems very unlikely Alibiba will revolutionize commercial banking anytime soon."
Antos noted that in the first quarter, ICBC's deposits were around 15 trillion yuan, while in May, total banking sector deposits totaled around 108 trillion yuan. At the end of the second quarter, Yuebao had around 574 billion yuan under management.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1