Minsheng Bank Hails Dawn of Direct Banking 3.0 in China


One of China’s leading commercial lenders says direct banking is entering a new era of development as the country’s financial institutions experiment further with fintech-driven business models.

The “2018 China Direct Banking White Paper” (2018中国直销银行白皮书) released by China Minsheng Bank and the China Financial Certification Authority (中国金融认证中心) indicates that at least 130 direct banks have emerged in China over recent years as part of efforts by commercial lenders to explore new fintech and online applications.

The paper points out however that direct banking still has a long way to go in China.

“The majority of direct banks in China remain at an incipient stage of development, which is the direct banking 1.0 era,” said the paper.

“Its chief features are a simple extension of mobile banking and internet banking, with products at the core, a focus on ‘deposit, investment, loan, payment’ products and services, and the primary goal of obtaining customers.”

According to the paper at this stage the increasing diversification of customer needs and stricter regulatory policies will led to an urgent need for product and service upgrades, amidst flourishing growth in both user numbers and asset scope.

The “direct banking 2.0 era” is distinguished by the use of various forms of fintech, including big data, cloud computing, the blockchain, the Internet of Things and artificial intelligence, to overcome challenges when it comes to information gathering, risk control and business models.

“Minsheng direct banking 2.0 made its appearance at the outset of 2018, and upholds the objectives of providing clients with richer products and smarter services,” said Luo Yong (罗勇), head of Minsheng Bank’s Online Finance Department and Direct Banking Operations Department to Financial News.

“[It] uses standardised, replicable, high-efficiency delivery methods to provide fintech services support to traditional enterprises.”

According to the Minsheng white paper “direct banking 3.0” encompasses the provision of retail customer-oriented direct banking services that are low cost and exclusively online; the provision of integrated financial services to corporate customers, including online payments and settlement, wealth management and funding support; and the provision of specialist financial cloud service platforms to independent software vendors (ISV), including rich API’s and open products.

“Over the next several years, the open banking model will become the mainstream direction of development for all banks,” said the white paper.

The paper recommends that commercial banks in China establish their own open financial cloud platforms, as well as make full use of fintech including cloud computing and security technology for the rapid, high-efficiency integration of the technologies of all parties as well as the delivery of financial services.

Other recommendations include observation and analysis based on big data technology, as well as targets sales and real-time risk control.