Chinese banking consumers point the way to a digital only future

Research by McKinsey and Company suggests that the Chinese consumers are comfortable with a future of digital only banking. A new study says more than 70 per cent of respondents would consider opening an account with a pure digital bank. Nearly the same number would consider making a digital bank their primary bank.

The results of the study – called Four Trends Shaping China’s Retail Banking Landscape – suggests that digitisation is taking China by storm.

The report outlines three forces driving the digital uptake starting with “…the changing needs and behavior of the Chinese consumer, including the importance of social media and word of mouth.”

The authors also suggest the regulators are taking a generally supportive stance toward innovation, for instance by inviting Internet players to enter the financial services industry.

Finally, they say, “Attackers entering the market, including Alibaba, Baidu, and Tencent, as well as incumbent banks that are changing their business models, including launching direct banks.”

Some description

The authors suggest that internet companies targeting the banking market should focus on the traditionally “un-bankable” segment (for example, “lower mass”.) McKinsey says, “…that financial services companies do not traditionally focus on and develop an “affluent-like” value proposition that can only be delivered economically by Internet companies (for example, personalized portfolio management delivered via a large Internet company’s platform).”

Among the wider findings from the study;

  • Chinese consumers are still among the least loyal in Asia. For example, less than half of Chinese consumers will remain loyal to their primary bank when offered more attractive pricing terms from competitors, compared with nearly 70 percent in emerging Asia.
  • Consumer needs and behaviors are becoming increasingly similar across China. For example, penetration of several banking products now varies by less than 5 percent across tier cities.
  • The country’s “Big Four” banks are less dominant. For example, their market share is eroding across tier cities and income segments.
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