Direct Banking the Necessary Path for Chinese Finance: Minsheng White Paper


A recent white paper on direct banking in China highlights the need for traditional lenders to provide more diversified online services, as well as eventually make the transition to open banking.

On 16 January China Minsheng Bank and the China Financial Certification Authority (中国金融认证中心) jointly released the “2018 China Direct Banking White Paper” (2018中国直销银行白皮书), which points to direct banking as the “necessary path” for traditional commercial banks to transition into internet banks.

According to the white paper Chinese banks across a range of categories have launched direct banking departments and services since the debut of the first direct bank in February 2014.

These include big state-owned lenders such as Industrial and Commercial Bank of China (ICBC), share-limited commercial banks such as Industrial Bank Co. and China Minsheng Bank, as well as municipal commercial banks such as Bank of Jiangsu and Bank of Nanjing.

As of November 2018 the number of online direct banks in China had reached 135 in total, while individual lenders have reported surging growth in direct banking clients.

China Minsheng Bank’s 2018 annual report indicates that its direct banking clients reached 19.1713 million with financial assets under management of 132.291 billion yuan at the end of last year, as compared to 10.9145 million clients with financial assets of 104.746 billion yuan at the end of 2017.

Huaxia Bank’s 2018 annual report indicates that its direct banking clients saw a 105.15% increase last year, after posting a rise of 92.05% in 2017.

Direct banking services in China are primarily concentrated in the areas of wealth management, online loans, life services and insurance, with the white paper highlighting the problems of service homogeneity and insufficient product diversity.

The white paper also points to the integration of technology with on-site services as the major challenge faced by direct banking in China, with open banking being the “necessary choice” for direct banks.

“In future banks will be a type of service, not a type of location, and bank products must be seamlessly integrated into various settings and ecosystems,” said the white paper.

“Openness, connection and sharing will be the key terms…the new form of ‘open banking’ created by commercial banks will become the trend.

“In market terms, open banking employs platform cooperation as its main business model, and can effectively strengthen customer stickiness and expand site arrangements – this will a major trend for the future development of direct banking.”