The joint venture will see Baixin Bank established pending approval by the Chinese banking authority with the mission of managing "wealth for the people and finance for the public, to develop an inclusive approach to finance, and to service the real economy", the companies said in a press release.
Internet companies have been trying to shake up the financial services market in the world's second-largest economy. Earlier this year Tencent launched an online only bank called WeBank, named after its popular instant messaging app WeChat. And Alibaba's financial affiliate Ant Financial followed with its own version called MyBank.
But Baidu said its offering is the first service run by a major internet company and a traditional bank. Citic Bank, which is owned by CITIC Group, has over 4 trillion renminbi ($626.6 billion) worth of assets under management. It also has operations in 126 cities with close to 1,300 business outlets. Baidu has over 640 million users using its search engine every month.
Both companies will be hoping to leverage each other's' expertise. Baidu said it will bring its traffic resources, behavioral data on users and data analytics to Biaxin Bank, while CITIC has knowledge of financial products. The behavioral data analytics could be used to assess a person's creditworthiness for example for "better risk management", the companies said.
"This is the first in-depth cooperation between an Internet company and a traditional bank, representing an entirely new model of "Internet + banking"—a bank that truly understands both the Internet and financial services," Robin Li, chairman and CEO of Baidu, said in a press release.
The move comes as the Chinese government looks to open up its financial services sector. Earlier this year, it launched a pilot program to establish five private rather than state owned banks, of which Alibaba and Tencent's projects were two. The aim is to help small-and-medium-sized enterprises get access to loans.
As part of the announcement, CITIC bank said that beginning December 1, customers will be able to make online transfers free of charge across China.