Connecting more than 25,600 outlets, Industrial Bank (IB) has signed bank-bank platform cooperation agreement with 20 rural commercial institutions at the provincial level, developing and launching various products of bank-bank platform; reached cooperation agreement with 108 rural banks on the construction and custody of technological system; provided 120 rural banks with agent access to the modern payment system of the People's Bank of China …
In recent years, relying on the bank-bank platform, IB devoted itself to helping small- and medium-sized financial institutions in the rural area to extend their service reach, break through the payment and settlement bottlenecks, and enrich service categories, playing an important role for rural financial institutions to serve the real economy and the “Agriculture, Rural Area and Farmers” in a better way.
A Broad Space for Rural Finance
“In China, rural area is the weakest link of financial service”, pointed out Shang Fulin, Chairman of China Banking Regulatory Commission (CBRC).
As it is a weak link, “When the competition between financial institutions becomes furious in the future, there will be more institutions looking for new market, and the broad rural area is a large one with great potential”, said Wu Qing, researcher of Development Research Center of the State Council.
With the accelerating process of urbanization and the successive promulgation of policies on the development and support of “Agriculture, Rural Area and Farmers”, rural financial institutions represented by rural commercial banks, rural cooperative banks, rural credit cooperatives and rural banks have witnessed flourishing development, growing into a power that cannot be neglected in China's commercial bank system.
By the end of 2012, there were a total of 337 rural commercial banks, 147 rural cooperative banks, 1,927 rural credit cooperatives, and 800 rural banks in China. At the end of 2012, the asset scale of rural financial institutions (including Postal Savings Bank of China (PSBC)) accounted for nearly 15.6% of the total asset scale of the whole banking industry, only 2% behind joint-stock commercial banks.
Facing this financial blue sea, IB, which devotes itself to becoming a professional supplier of banking service for small- and medium-sized financial institutions, observantly discovers that China's rural financial institutions and the bank are complementary with each other in an extensive manner.
Due to historical reasons, compared with state-owned and joint-stock banks, rural finance has obvious disadvantages in many aspects such as capital scale, capital strength, business qualification, risk management, technological system, outlet layout, and talent training. However, rural financial institutions have their natural and unique advantages – rich outlets and massive customer resources across the urban and rural areas in China. In particular, with the accelerating process of urbanization, the incomes of farmers also keep increasing quickly.
Complementarity means rooms of cooperation, which create an opportunity for the development of bank-bank platform of IB. “Based on the construction of a networked financial platform, the platform transmits advanced management experience, financial products and technological capability to the small- and medium-sized financial institutions in the cities of the third and fourth tiers and rural areas, so as to cover both rural and urban areas and serve ‘Agriculture, Rural Area and Farmers' effectively” said Tang Bin, Board Secretary of IB, in the interview of Capital Week previously.
Since 2005, IB's bank-bank platform has, starting from handling agency payment and settlement of small- and medium-sized financial institutions, grown into a program with integrated financial service solutions covering wealth management, payment and settlement, technological management output, financing service, capital and asset-liability structure improvement, etc. Now, the bank-bank platform has 446 banks signing agreement for cooperation, with its counter service network covering more than 25,600 banking outlets.
Joining together for Development
Tang Bin sums up the bank-bank platform as a model “complementing the respective advantages and resource sharing” with each other beyond competition.
The premise is that IB takes the economic centers as the main battlefield and positions medium-sized enterprises and medium- and high-end retail customers as target customers, and rural financial institutions take towns and rural areas as the main battlefield and position it as their major responsibilities to serve “Agriculture, Rural Area and Farmers”. Thus, no fundamental interest conflict exists between both parties.
A highly complementary network may be built based on different service scopes and groups.
As discovered by IB, rural financial institutions boast numerous outlets, but each of them is confined to a limited area. As a result, once a customer leaves the area that such a bank serves, it is hard for him or her to get service support. Moreover, IB has established a backbone network in the cities of the first and second tiers across China. In recent years, the counter pass network of the bank-bank platform also connected a large number of urban commercial banks. The cooperation between both parties can form a powerful payment and settlement network across the urban and rural area.
Uncle Zhang, who lives in Zhuanghe, Dalian, Liaoning, has a great feeling to this. As a customer of Zhuanghe Huitong Village Bank, he is not used to use bank card. Nonetheless, with his own deposit book, he can go to Fujian to see his son and Beijing to see his daughter, which makes him feel very comfortable.
In these years, his small general store witnessed increasing business, so he made considerable incomes. He considered how to manage his money for his later years, but the interests of savings in banks are too low. Years ago, the rural bank in the town told him that the business he wanted was called wealth management, but the bank couldn't provide such service due to limited business qualification or assets management capacities. After the local rural bank joined the bank-bank platform of IB, he could easily buy wealth management products of IB including financing and fund products.
“The bank-bank platform is a good thing”, said Uncle Zhang. Not only can he earn more money compared with depositing money in bank, but he also found that the working efficiency of officers in the rural bank had been improved significantly. The reason was the agent access to the payment system of the central bank in virtue of the bank-bank platform, an officer of the rural bank said, and in addition, the platform could also provide technological system output and talent training. Hence, in the future, the rural bank can provide more modernized financial services.
The bank-bank platform has changed the conventional business mode of commercial banks that providing only financial products, General Manager Zheng Xinlin of the Institutional Business Department of IB said, “by taking management, technology and business process as outputable products, we provide comprehensive financial service solutions for various cooperative banks, not only exploring brand-new business areas, but also making bold attempt to transform our business development model and profiting model”.
Meanwhile, with relatively simple business structures, rural financial institutions depend more on conventional deposit and loan businesses for scale and profit growth. Against the background where the market-oriented interest rates are in an accelerating process, IB, with solid funds and capital strengths, flexible and efficient risk management mechanism and superb funds operation capability, can help rural financial institutions to improve their business and profiting structure by intensifying cooperation with rural financial institutions in the areas of extending capital sources and increasing capital utilization channels.
Complementing each other in the five aspects including service network, wealth management, business and profiting structures, technological system and talents training, Zheng Xinlin said, we joined together our strengths and “created a new situation for achieving win-win results and common development.
Nine Years of Efforts Bringing Exuberant Business Growth
In 2004, IB put forward the development conception of bank-bank platform featuring “serving as agencies mutually based on networked cooperation”.
Over nine years, IB ran around like a preacher, actively advocating extensive cooperation between different types of bank and concentrating, with great efforts, on breaking through the conventional model in which competition overwhelms cooperation between banks.
In September 2011, the bank-bank platform of IB gathered together with 16 provincial rural credit cooperative unions and officially released the overall service program toward rural financial institutions, which covers a variety of fields including payment and settlement, wealth management, technological management output, comprehensive credit line, capital utilization, and personnel training. This raised the curtain for IB to carry out all-round cooperation with rural financial institutions.
Thanks to the support of IB's technological system, Hengfeng Rural Bank of Panjin, Liaoning has removed its worries on whether the technological system can operate in a secure and stable way. President Jing of the bank said: “Now, with the core system built by and entrusted to IB, we can develop our business free of cares finally. After establishing cooperation with IB, we feel that we have great confidence in developing our business.”
This institutional custody model won high recognition of the China Banking Regulatory Commission (CBRC), and IB was chosen as a drafting entity for the “Guidelines for IT Construction of Rural Banks”.
Moreover, with the agency sale agreement on wealth management products signed with IB, Heilongjiang Rural Credit Cooperative Union has cultivated its own customer group, trained a strong sales team, and improved its capabilities in the research, development and management of wealth management products. Finally, the union achieved transformation of business model, issuing wealth management products instead of acting as sales agency of wealth management products.
In addition, IB also provided personnel training, cultivating a large group of financial management talents for rural financial institutions, improving the service level of rural financial institutions. According to incomplete statistics, IB has provided business training for 10 provincial rural credit cooperatives, with trainees exceeding 1000 person-times.
Now, IB has signed the bank-bank platform cooperation agreement with 20 rural financial institutions at the provincial level. 108 rural banks reached cooperation agreement on the construction and custody of technological system with the bank-bank platform, and 120 rural banks realized agent access to the modern payment system of the People's Bank of China via the bank-bank platform, thus getting rid of the predicament of isolated payment island.
With more than 25,600 networked counter pass outlets connecting cities with rural areas, individual customers of rural financial institutions can really travel around China with only a card (deposit book). Through the cooperation based on the bank-bank platform, financial products have reached rural areas. Wherever one lives, Mohe in the farthest north, Mongolia grassland, Kashgar in Southern Xinjiang, the frontier in Yunnan …, he or she can conveniently buy fine wealth management products. Rural financial customers really enjoy the modern financial services.
The bank-bank platform in linkage with rural financial institutions for common development and prosperity has become a vivid portrait for IB's social responsibility philosophy of “obtaining reasonable profits while bringing benefits to the stakeholders”. Relying on the cooperation with rural financial institutions, the bank-bank platform also witnessed considerable returns. At present, of the institutional deposits of IB amounting to about RMB 1 trillion, more than RMB 350 billion are from small- and medium-sized banks like rural financial institutions.