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Commercial Banks: Digitally Diligent

Dec 28-2020   



According to the PKU Commercial Banks Digital Transformation Index, state-owned banks and shareholding banks lead the digitalization drive in China and are followed in the heels by private banks, while city commercial banks, rural commercial banks and foreign-invested banks trail far behind.

 

Xie Xuanli, Associate Professor of the NSD, revealed the information in a recent seminar celebrating the fifth anniversary of the establishment of the Institute of Digital Finance at PKU. She’s a senior research fellow with the Institute. The Index covers 228 banks, which account for 97% of total bank assets in China, and consists of three facets: digital cognition, digital organization, and digital products.

 

The overall index has risen from 12.29 in 2010 to 82.3 in 2018, or an annual growth rate of 27%, illustrating the rapid transformation undergone by commercial banks. Cognitively, E-banking, the hottest word in 2010-2012, seems ages old when today’s discussions are dominated by big data, AI, inclusive finance, cloud computing and blockchain. Organizationally, 75% of banks have set up a digital finance department but many still have problems recruiting talents. As a solution, 28.5% of banks are teaming up with internet firms and technology ones to drive innovation. Product-wise, the most notable change is the downsizing of physical bank sites and the increase in online channels. Virtually all banks offer services and products on mobile phones and WeChat.

 

Three major challenges stand in the way. The first one is how not to confound digitalization with digitalized channels. Most bank apps still lag far behind AliPay and Wechat Pay in user stickiness and activeness. The second one is how to re-define and re-discover values. Merely putting traditional products for online sale does not suffice. The third challenge is about reshaping organization and culture to deal with chronic issues such as entrenched hierarchy, long process, and slow decision-making. More radical ways might be needed: so far 12 banks have established FinTech subsidiaries in a bid to make room for innovation.

 

Commercial Banks: Digitally Diligent

Dec 28-2020   



According to the PKU Commercial Banks Digital Transformation Index, state-owned banks and shareholding banks lead the digitalization drive in China and are followed in the heels by private banks, while city commercial banks, rural commercial banks and foreign-invested banks trail far behind.

 

Xie Xuanli, Associate Professor of the NSD, revealed the information in a recent seminar celebrating the fifth anniversary of the establishment of the Institute of Digital Finance at PKU. She’s a senior research fellow with the Institute. The Index covers 228 banks, which account for 97% of total bank assets in China, and consists of three facets: digital cognition, digital organization, and digital products.

 

The overall index has risen from 12.29 in 2010 to 82.3 in 2018, or an annual growth rate of 27%, illustrating the rapid transformation undergone by commercial banks. Cognitively, E-banking, the hottest word in 2010-2012, seems ages old when today’s discussions are dominated by big data, AI, inclusive finance, cloud computing and blockchain. Organizationally, 75% of banks have set up a digital finance department but many still have problems recruiting talents. As a solution, 28.5% of banks are teaming up with internet firms and technology ones to drive innovation. Product-wise, the most notable change is the downsizing of physical bank sites and the increase in online channels. Virtually all banks offer services and products on mobile phones and WeChat.

 

Three major challenges stand in the way. The first one is how not to confound digitalization with digitalized channels. Most bank apps still lag far behind AliPay and Wechat Pay in user stickiness and activeness. The second one is how to re-define and re-discover values. Merely putting traditional products for online sale does not suffice. The third challenge is about reshaping organization and culture to deal with chronic issues such as entrenched hierarchy, long process, and slow decision-making. More radical ways might be needed: so far 12 banks have established FinTech subsidiaries in a bid to make room for innovation.