A senior figure from the peak body for the Chinese banking sector has highlighted the immense changes sweeping the industry amidst an ongoing wave of digitisation.
Zhao Chenggang, (赵成刚), head of the system services department of the China Banking Association (CBA), said that digitisation and fintech are bringing both challenges and opportunities for Chinese banks.
The extremely strong returns brought by fintech drivers have compelled some banks to lead growth via technological innovation, and others who lack the means to engage in independent innovation to copy and replicate these successful models.
Zhao made these remarks on 13 December at the 14th China Electronic Banking Annual Grand Ceremony (第十四届中国电子银行年度盛典), which saw the participation of over 300 members of the banking sector and the release of the “2018 China Electronic Banking Survey Report” (2018中国电子银行调查报告).
Zhao highlighted four changes brought by digitisation to the Chinese banking sector:
i) Digitisation is changing the management model for banks.
In the past, traditional banks enjoyed comparatively mature and stable systems, yet fintech has brought changes in terms of procedures and customer perspectives.
“The digital environment has changed the commercial model, and the banking management model has undergone change.”
ii) Digitisation transition has brought operational challenges.
“The biggest change brought by technological evolution for banks has been the difficulty of balance safety, liquidity and efficiency.
“Following an increase in the scale of market volatility, balancing the three has becoming increasingly difficult.
“From compliance regulation to risk regulation, long-term stable progress will test the ability of banks to transition…this is the biggest challenge brought by digitisation and digital technology.”
iii) Ecosystem changes and risk changes.
“In the era of the digital economy, customer demands are undergoing change, the role played by transaction counter-parties is undergoing change, the banking ecosystem is undergoing change, and risk is also undergoing change…these are all changes in the digital environment. ”
iv) Digital transition is creating changes in the computing power of banks.
“Following expansion in the digital volume and digital transaction volume, many banks, especially small and medium-sized banks, are facing the choice of either shifting from their traditional core frameworks towards an online framework, or undergoing expansion.
“Some banks are using cloud computing and virtualised and distributed frameworks to increase computing power, while other banks are using artificial intelligences to implement digital governance, and integrate and upgrade computing power by means of big data analysis.”
Zhao recommended that Chinese banks focus on four areas during the process of digitisation and digital transformation:
i) Human resources and independent capability.
ii) Innovation and systems.
iii) Technical standardisation and application standardisation.
iv) Consumer education and protection.