Digital Banking in China: What are Chinese consumers looking for?

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Following China’s attempts to deregulate its financial market, the competition in the financial services sector continues to intensify. In such an environment, Internet and mobile finances are becoming increasingly important. There is an ever growing pressure on financial institutions to make use of Web and mobile technologies to appeal to new clients and expand their market share.

Banks in particular have reached to customers online through more effective marketing and customer communication. Since 2011, digital banking has been on the rise and consumers are more and more frequently turning to computers, smartphones, and tablets to do business with their banks, while visiting branches and calling service hotlines take a downturn.

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83% of Chinese consumers are willing to shift their holdings to a bank that offers a compelling digital proposition. (McKinsey & Company)

However, digital banking consumers are looking for more than just an online presence. Four characteristics are more important to customers than the quality of digital channels:

  1. The quality of basic services,
  2. The variety of the financial products,
  3. The brand reputation, and
  4. The overall experience.

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Chinese consumers are among the least loyal in Asia. Less than half of them will remain loyal to their primary bank when offered a more attractive offer.

Besides good-quality customer experiences across the full product portfolio, digital banking customers in China are also particularly keen on the specific features such as loyalty programs, discounts offered over mobile devices, and complete online access to their portfolios.

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80% of China’s Internet users access their mobile devices to go online and most consumers use mobile banking to make the payment for their purchase.

The emergence of mobile payments has brought about a change in the shopping habits of Chinese online consumers. The mobile payment is increasingly more popular due to the e-commerce and mobile internet penetration.

Following these trends, some of China’s big players in the field of Internet, namely Alibaba, Tencent and Baidu, have decided to enter the financial services sectors with their own innovative financial solutions.

“China’s finance industry only serves 20% of clients. I see the 80% of businesses that have not been served,” said Jack Ma, founder and chairman of Alibaba.

Alibaba, China’s biggest e-commerce company, has been engaged in a micro-loan business since 2010, offering consumers an alternative to traditional banks and a personal fund called Yuebao was added to Alibaba’s product portfolio in 2013. With its main focus being savings, it promised higher interest rates than those offered by China’s state-dominated banks.

However, the latest and boldest move into personal finance by Alibaba was a launch of MYbank earlier this year. MYbank is a new online bank offering loans up to RMB 5 million, but it also promises to offer smaller loans than regular banks normally would.

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Alibaba’s online bank also comes up against Tencent’s WeBank, which launched in January when WeChat, China’s most popular messaging app, was enhanced with a “wealth” section offering users the option to store their savings in a new money fund. The annual rate on the fund is 6.435 percent, and it requires no minimum investment. The fund is managed by Huaxia Bank.

The last of the top three innovators in China’s banking finance is Baidu with its Baifa, a fund maintaining the highest interest rate of the three. However, it is capped at a certain amount the users can collectively invest.

The real battle in privatized consumer financial services will remain between Alibaba and Tencent. Baidu does not have any widely popular products or services that require user registration; it is mostly still used as a search engine. Alibaba’s Taobao and Alipay and Tencent’s WeChat are both massively popular and require registration, which gives them a captive audience.

 

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