Online Finance is Changing the Role of China’s Physical Banks


As mobile and online banking platforms surge in popularity, Chinese lenders are changing the nature and staff structure of their branch operations.

China’s leading banks are already abuzz with talk of a shift towards “smart, light banking,” which in the opinions of many will mean a reduction in the number of bricks and mortar branches maintained by lenders, along with attendant teller staff.

Some observers even point to the possibility of mobile and online finance replacing traditional offline operations completely, rendering the physical bank obsolete.

The heads of Chinese leading banks are more sober in their assessments, however, pointing instead to a change in the function of the physical bank as well as an attendant shift in the role played by banking staff.

Despite the surging popularity of online finance, figures from China’s Banking Sector Association show that the number of real-world bank branches in China is still on the rise, increasing by over 3,800 last year to hits 228,000 in total.

While 92% of transactions performed by the Industrial and Commercial Bank of China are now conducted online, the bank continues to service half a billion offline clients via more than 13,000 branches scattered across China.

Yi Huiman, ICBC chairman, is firmly convinced that bricks and mortar branches will remain indispensable to the business of banking.

“There is the view that offline channels can do everything, that the new technologies will take over the world, and that offline channels are backwards and need to be abolished,” said Yi. “This viewpoint is not in accordance with the laws that govern financial development.”

Yi believes that online and offline banking channels are not a zero sum proposition, but share a mutually complementary relationship and should be used in coordination with each other.

“Large-volume, complex and high-end operations are still completed offline, while simple, standardised and small-sum operations are completed online. Both are necessary,” said Yi.

Even if online banking doesn’t threaten to render traditional bricks and mortar branches obsolete, it will nonetheless dramatically change the role of the physical bank and its staff.

This is already the case with many banks in China, which have replaced tellers with smart self-service machines that can perform almost all personal non-cash banking operations, including transfers, remittances and fee payments, following the entry of personal details and identity checks by staff.

Academics expect the staff structure of Chinese banks to shift to one which is more in line with North America and Europe, where employees are more likely to hold sales as opposed to teller positions.

According to Dong Xisen, a visiting fellow at the Chongyang Financial Research Academy of Renmin University, the personnel structure of China’s banking sector consists overwhelming of teller staff, who comprise 70 – 80% of employees. Sales staff account for just 20 – 30% of the bank workforce.

In sharp contrast 60 to 80% of the staff of US and European banks are sales personnel, with teller staff comprising only 20 to 40% of employees.