White Paper on Chinese Direct Banking Says Smaller Lenders Are Taking the Lead


A new white paper on China’s fledgling direct banking sector points to the leading role played by smaller lenders such as joint-stock banks and municipal commercial and rural commercial banks.

The “2018 China Direct Banking White Paper” (2018中国直销银行白皮书) was released by China Minsheng Bank and the China Financial Certification Authority (CFCA) on 16 January in Beijing.

According to the report China’s direct banking sector has reached a state of “preliminary formation” following five years of rapid development.

Leading players include Minsheng Direct Bank (民生直销银行), Bank of Jiangsu Direct Bank (江苏银行直销银行), ICBC Direct Bank (工银直销银行), Ping An Pocket Bank (平安口袋银行), Bank of Shanghai Quick Cash (海银行上行快线), CITIC aiBank (百信银行) and WeBank (微众银行).

The report points out that the huge state-owned giants who have long dominated Chinese banking have been slower to expand into direct banking, with the smaller, more nimble lenders instead taking the lead.

“The big state-owned banks are still late-arriving elephants amidst the wave of development of direct banking…[they] are huge in size and hard to manoeuvre.

“At present only ICBC and Bank of China have launched direct banks, and Bank of China’s is only directed at offshore clients…ICBC Direct Bank launched the ICBC Rong eBank (工银融e行) in February 2015, forming ICBC’s “three platform – one centre” online finance strategy in combination with Rong eLian (融e联) and Rong eGou (融e购) and the internet finance centre.”

In sharp contrast to the big state-owned banks, the national joint-stock banks are comparatively active and agile, while still possessing a sizeable customer base and technical ability, conferring them with a “natural advantage” when it comes to direct banking.

According to the white paper China’s national joint-stock banks are the “leaders of the direct banking sector,” with all 12 of them already launching their own direct banks.

Municipal commercial banks and rural commercial banks are also actively seeking to develop their own direct banking services, with the report referring to them as a “mainstay force in the sector.”

“They are using the development of direct banking to not only compensate for disadvantages in the number of their own branch points, but to also pursue a development direction of servicing ‘long-tail customers’ and expanding their customer base,” said the report, highlighting in particular Bank of Jiangsu Direct Bank’s adoption of new forms of fintech such as big data and artificial intelligence.

As part of the white paper China Minsheng Bank also conducted a “China Direct Banking Survey”of 1280 individuals and 70 enterprises.

The survey found that nearly 70% of direct banking customers in China were between the ages of 27 – 48, while 37.27% were between the ages of 28 and 37, as an age demographic combining technical savvy with rising incomes.

52.42% of Chinese direct banking customers had an average monthly income of between 5,000 and 12,000 yuan, while 30.23% had an average monthly income of less than 5,000 yuan.

63.36% of respondents said they used to internet to handle over 50% of financial operations, including daily payments, wealth management, and micro-loans.

59.88% of respondents most commonly made use of direct banking for bank wealth management, while for 48.44% the most common usage was balance wealth management and savings deposits.

A direct banking app was the most common medium of usage for nearly 70% of customers, followed by a direct banking WeChat account (21.88%), while just 8.44% of customers most commonly make use of official webpages, and 1.09% direct banking H5 pages.