The head of Tencent-backed online lender WeBank has highlighted four major trends for China’s banking sector as the impact of fintech adoption expands.
WeChat president Li Nanqing (李南青) said that the era of smart finance has arrived, and will see the gradual and in-depth integration of artificial intelligence, blockchain, cloud computing and big data into traditional financial operations.
“In this era, fintech will drive financial services towards increased data usage, targeting, reliability and convenience,” said Li on 23 September at the 2020 China Banking Sector Development Forum Cloud Summit (2020中国银行业发展论坛云端峰会).
According to Li over the next five to ten years Chinese banks are likely to see trend-like changes in four areas:
- Agility and openness will become the mainstream of development. Banks will increase their procedural agility via upgrades to administrative models, replacement of IT frameworks, organisational adjustments and re-shaping of corporate culture. The banking sector will increase its openness, and pursue in-depth cooperation with other banking institutions and ecosystem partners to create platform-based, ecosystem commercial models.
- Increased online operation, differentiation and specialisation. COVID-19 has served as a major test for non-contact financial services, and greatly accelerated the expansion of online services from first and second-tier cities to third and fourth-tier cities as well as rural areas. Banks will increasing “return to the source,” and focus on servicing the real economy in their own localities, as well as pursue a path of differentiation and specialisation.
- Fintech will accelerate innovative development. Fintech will help Chinese banks to achieve the “Three Increases and Two Decreases” (三升两降) (increases in efficiency, scale and customer experience, decreases in cost and risk), and this will gradually become part of industry consensus. The banking sector will markedly increase its fintech investment, R&D expenditures and innovation. Fintech sandbox trials in China will accelerate.
- Asset quality pressure and capital pressure will co-exist. The impacts of the COVID-19 will be long-term and complex, which will pose ongoing challenges to the risk-control capability and asset quality of Chinese banks. A push from the Chinese government to stabilise employment and help small businesses will accelerate the consumption of capital at small and medium-sized commercial banks, who will as consequence face “dual tests” in the areas of capital supplementation and asset quality.