Unconventional Digital Transformation Paths of Chinese Banks (Part 2)

  1. Bank’s own capability, i.e. is the bank leveraging the latest technology to be on par with the competition? More fundamentally, is the bank “able” to leverage the latest technology?
  2. Bank’s reach of customers, i.e. the digital battle is not happening only at the traditional premises like branches, agents, etc, but the Internet, smartphones, digital touchpoints, and the like. Are the banks present in these digital battlefields to combat, or simply absent in these competitions?

Fintech 3.0 Explosion in China

  1. Digital payment and wallet boom — The exponential boom happened only at 2013–2014.
  2. First digital bank and insurance — WeBank(微众银行) and MYbank(网商银行) were the first batches of digital banks and both operational at mid 2015. ZhongAn (众安保险), the first digital insurer, was established earlier at late 2013.
  3. Retail transaction share by digital payment — Mobile commerce, including in-app payments and mobile browser payments, is the dominant factor driving strong digital commerce growth. The share in China through the digital wallet platforms like Alipay has increased from accounting for just 5% of all retail transactions in 2013 to 45% in 2017 [4]. Digital wallets were estimated to have added approximately 40 billion to payments revenues globally.

The Digital Transformation Recipes in China

  1. Agile Foundation — Agility is of essence if the competition can pop up and grab a significant number of your potential customers in no time. The world would be familiar with organization construct like Spotify to help organization innovate. The world is also embracing cloud computing as the mean to enable IT agility, cutting down the unnecessary complication in data centre setup and operations. A less well known fact is how cloud computing enables an evergreen IT strategy. Apart from IaaS, cloud computing can enable all the advanced technologies the world is experimenting, be it big data, AI, blockchain, IoT, etc. If your organization takes half a year to evaluate a product, complete the architecture review, close the procurement assessment, etc, you should take a look at what the major cloud service providers like Alibaba Cloud would have done in the same duration. There wouldn’t just be product upgrades in the same areas but very likely new products that are pre-integrated and can be experimented at the speed of a click. There need not be worries of more legacies at system go-live.
  2. New Customer Engine — The traditional enterprises have been slow to adapt to the customer norms since smartphone becomes popular. The race and bar of the game is led and set by Internet industry giants. The situation worsens when the CIOs are unable to articulate the success factors with an engaging mobile app. Some project teams went to the extreme of spending multiple months in the customer journey and fancy UIs, and ignoring the rest of the enterprise architecture that support the app. We shall all learn from the China Guangfa Bank case shortly.
  3. Intelligent Connected Business — Improving a bank’s own capabilities is essential to compete. And being present at your customers’ touchpoints are equally important. When the digital commerce happens at Taobao, Tmall, etc, are the banks still confined at their mobile banking app, or worse waiting for customer visit to submit their applications physically? While the world is slowly exploring the open API of the banking institutions, China has “Finmall” which allows shopping of financial services [5]. Unlike the typical aggregators, where the products of different financial institutions are listed and compared, Finmall connects the consumer scenarios with the banks and the related supporting organization, say credit data provider. When a consumer purchase say a wedding photography package, he could be offered an installment loan as one of the payment options, where few banks may bid to appeal to this particular consumer with competing rates and terms. We shall also learn from the Bank of Nanjing case shortly on its approach.

A Long Story to a Killer App from China Guangfa

Real Platform Business of Bank of Nanjing

North Star of Digital Transformation Journey

Reference

  1. McKinsey, “Global payments 2018: A dynamic industry continues to break new ground”, https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/Global%20payments%20Expansive%20growth%20targeted%20opportunities/Global-payments-map-2018.ashx
  2. World Economic Forum, “The Fourth Industrial Revolution: what it means, how to respond”, https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/
  3. The Banker, “The brave and brilliant new world of Fintech 3.0”, https://www.thebanker.com/Transactions-Technology/Comment/The-brave-and-brilliant-new-world-of-Fintech-3.0
  4. McKinsey China(麦肯锡中国), “重写游戏规则:金融中介圈如何改变银行业”, https://www.mckinsey.com.cn/%E9%87%8D%E5%86%99%E6%B8%B8%E6%88%8F%E8%A7%84%E5%88%99%EF%BC%9A%E9%87%91%E8%9E%8D%E4%B8%AD%E4%BB%8B%E5%9C%88%E5%A6%82%E4%BD%95%E6%94%B9%E5%8F%98%E9%93%B6%E8%A1%8C%E4%B8%9A/
  5. e-Finance Union(网金联盟), http://www.cibu.org/lmjj
  6. Alibaba Cloud, “广发银行李怀根:架构设计要有前瞻性,敢于对标敢于重构”, https://mp.weixin.qq.com/s/OJiqHcN8NEG3d8EGi9fL0w
  7. Ant Financial mPaaS, https://tech.antfin.com/products/MPAAS
  8. McKinsey, “Six digital growth strategies for banks”, https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/six-digital-growth-strategies-for-banks
  9. Alibaba Cloud, “如何在4个月内建设南京银行”鑫云+”互金开放平台?”, https://mp.weixin.qq.com/s/zH9v1dT6lhx_WlH1tk-GSw
  10. Alibaba Cloud Enterprise Distributed Application Service (EDAS), https://www.alibabacloud.com/product/edas

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Follow me to keep abreast with the latest technology news, industry insights, and developer trends. Alibaba Cloud website:https://www.alibabacloud.com

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