Ecosystem development, customer engagement, and financial inclusion emerged as the primary focal points for retail banks in China as they navigated through challenges in 2023. Despite a backdrop of slowing local economies, narrowing net interest margins (NIM), and a challenging credit environment, particularly in the real estate sector, leading retail banks have demonstrated resilience and adaptability by harnessing cutting-edge technologies like big data, artificial intelligence (AI), and machine learning (ML) to drive innovation and achieve balanced growth.
These banks are placing significant emphasis on enhancing customer engagement, promoting financial inclusion, and building comprehensive ecosystems to cater to evolving consumer needs and preferences.
The year presented Chinese retail banks with an array of hurdles. Slowing local economies and a deteriorating credit environment, particularly in the real estate sector, posed significant challenges. The adoption of advanced technologies such as big data, AI and ML are being used to drive innovation across various aspects of banking operations, from customer engagement to risk management.
Customer engagement has emerged as a critical area of focus for Chinese retail banks. Recognising the importance of strengthening customer relationships, banks like Ping An Bank have implemented AI-driven sales management systems. These systems provide tailored recommendations and real-time responses to customers, leading to a remarkable 360% increase in customer participation in events and a 240% increase in visit rates. This customer-centric approach is reshaping the way banks interact with their clients.
To enhance customer experience and loyalty, China Guangfa Bank launched the “Jincaihui” membership system with 18 types of benefits, including gold red packets and repayment vouchers. Various activities, such as member days have attracted over 1.2 million participants, driving nearly one million customer-initiated transactions, including loan and card applications as well as gold account openings.
Collaborations promote ecosystem growth
Chinese retail banks are also shifting towards ecosystem growth through collaborative efforts with various stakeholders. China Merchants Bank (CMB) stands out as a prime example with its digital platform designed for electric vehicle (EV) manufacturers. This platform offers end-to-end services, from vehicle purchase to post-purchase care, securing a substantial 30% market share in EV sales instalments. It highlights the significance of creating comprehensive platforms capable of addressing diverse consumer needs.
Promoting financial inclusion, particularly for small and medium-sized enterprises (SME), is a cornerstone of the industry’s evolution. Initiatives like Wei Yedai, an online unsecured corporate working capital loan product, have significantly benefited over 50% of first-time borrowers who lacked credit records. It addresses the short, small, and urgent loan needs of these businesses. Similarly, MYBank, leveraging AI and technology, has facilitated substantial year-on-year growth in lending by dynamically calculating credit limits and facilitating substantial loan disbursements.
As the retail banking industry in China undergoes a transformative phase with the increasing adoption of big data, AI, and ML, it faces new challenges. Data security, privacy, and cybersecurity have become critical concerns. Compliance with new regulations and requirements has added to costs. Additionally, as Chinese consumers become increasingly tech-savvy and digitally connected, their expectations for seamless and personalised banking experiences are rising, putting pressure on retail banks to accelerate efforts towards a customer-centric model.
Sustained growth and financial inclusion
Leading banks, including China Construction Bank, CMB, Ping An Bank, and WeBank, have not only weathered market upheavals but have also thrived by adopting a forward-thinking approach. As these banks continue to leverage technology and prioritise customer needs, the future holds promise for sustained growth, enhanced customer experiences, and increased financial inclusion in China’s retail banking sector.
Despite the challenges that the Chinese retail banking industry faced in 2023, leading banks are paving the way for a balanced future. As technology continues to evolve, these banks are well-positioned to provide innovative solutions and meet evolving needs, while also balancing growth with responsibility.