WAKING UP TO COMPETITION
Lenders invest heavily as online financial firms make rapid strides
Embattled banks square up against online firms in fintech
Chinese banks have begun giving more importance to financial technology, or fintech, in order to become more competitive as internet-based companies are taking rapid strides in the field, industry insiders said.
Financial services firm EY defines fintech firms as “organizations combining innovative business models and technology to enable, enhance and disrupt financial services”.
China Merchants Bank, one of the first Chinese banks that highlighted fintech, released its latest app this month, in which intelligent tools use big data and cloud computing to provide tailor-made wealth management and information services, CMB said.
“Future clients will ask for more convenient and safe financial services, as well as independent, professional and customized services from banks,” said Liu Jianjun, vicepresident of CMB. “To stand out in the fiercely competitive market, banks need to learn how to create more value for clients through fintech.”
The bank has upgraded its app once a year since 2014, each time with more emphasis on blending internet, data and intelligence for risk control and better financial services.
This year, it began to pour 1 percent of its annual pretax profit into development of fintech. If necessary, more funds up to 1 percent of its revenue, which amounts to about 2 billion yuan ($300 million) based on revenue last year, would be allocated, according to bank chairman Li Jianhong.
According to McKinsey & Company, a global consultancy services firm, about 500 million Chinese users benefitted from internet-based financial services in 2016.
With more participants entering the sector, the era of fintech is sinking its roots deeper.
The new generation of customers are more willing to try convenient, fast and multi- channel digital products. Chinese banks have been evolving from electronic, internet and mobile banks to totally digitalized ones, McKinsey said.
Internet giants, including Baidu Inc, Alibaba Group and Tencent, have put forward many financial services products through their online platforms.
Alibaba, for instance, has covered almost all businesses in the investment and wealth management fields, including cash deposits and withdrawals, individual credit records and insurance services.
JD Finance, a subsidiary of the country’s second largest e-commerce company JD Group, also provides crowdfunding, insurance, loans and stock market-related services for individuals and companies.
Huang Wenyu, deputy general manager of the information technology department of China Guangfa Bank, said though the banking industry started to adopt new technology very early, it tends to hold a conservative attitude toward cutting-edge innovation.
However, banks have been feeling the heat from internetbased financial companies in recent years, which has prompted the former to invest more in fintech, he said.
In 2016, China Guangfa Bank announced a plan to construct a digital bank based on cloud computing, big data and artificial intelligence, as an engine for further development.
It expects to comprehensively improve fintech in three to five years to decrease operational cost and expand business, Huang said.
He said since new technologies, including AI and blockchain, are still growing, both banks and internet companies have the same opportunity to compete.
And banks’ strength lies in their experience in the financial business and the massive data on customers, trading and markets collected since the 1990s, he said.
Jiang Chaoyang, general manager of CMB’s retail internet banking department, agreed. “Since competition with internet-based financial companies is inevitable, traditional banks should make the most of their strengths, which are the complete offline network of asset management and risk control,” Jiang said.