The direct bank has witnessed fast development in China since 2014. Now, there are over 30 direct bank institutions represented by Industrial Bank (IB) and China Mingsheng Bank (CMBC). Nonetheless, direct bank institutions also generally face the challenges of homogenized products, limited simple functions, unsatisfactory account opening experience, etc.
“It is the core work of IB’s electronic banking to develop internet finance by taking direct bank as the breakthrough point,” said Yang Zhong, General Manager of the Electronic Banking Department of IB in the interview with the reporter of the 21st Century Business Herald recently.Real-time opening of weak real-name account online
The needs of customers for direct bank are mainly concentrated in the following three aspects: first, product appeal; second, convenience in operation; and third, security.
“Good product, entrance and experience”, Yang summed up the three “footholds” of IB Direct Bank in this way.
Yang indicated that IB Direct Bank was not simply the updated version of other electronic banking channels like mobile banking. The service of mobile banking was only available to the customers of IB, but the service of direct bank was offered to all bank card holders. In the initial preparation period, IB had specified the service model of “direct bank”, namely online direct sale via internet. In terms of product selection, the main products are highly mature wealth management, fund and fixed deposit via internet banking. In the aspect of customer source extension, real-name verification regarding accounts of cardholders of other banks is done via strategic cooperation with third-party payment companies. Yang said: “It was initiated by IB to open weak real-name accounts online on the real-time basis. Now, it is achieved by only a limited number of banks.” It is learnt that most banks require uploading photo ID for examination to open accounts.
Based on cooperation with third-party payment companies, IB Direct Bank can support one-key purchase of customers with cards of 12 banks, such as ICBC, ABC, BOC and CCB, free of registration and logon. Simplifying the account-opening formalities for customers based on third-party verification of password and identity, it can open IB weak real-name accounts for customers with cards of other banks, thus building a channel for them to purchase wealth management products sold by IB online.
Of course, there are now some common problems in the whole industry. For instance, upon the first time of purchasing wealth management products from a bank, signing in person is required at the banking outlet concerned; technologically, direct bank has been opened to customers of other banks, but some restrictions can unavoidably be imposed on the capital outflow due to competition among banks. “Now, our direct bank employs the UnionPay payment channel now, and we are considering adding other payment channels, such as the super internet banking of and modern payment system of the PBC.” Yang said, “In the future, we will achieve the function that all bank cards can be used to purchase wealth management products on a real time basis, improving the customer experience constantly.”Exploring P2P and other innovative products
In terms of product innovation, now IB Direct Bank mainly offers the products of wealth management, fund and fixed deposit, consisting of 7 types in total, namely “Industrial Treasure (Xingyebao)”, Business Boom (Xingyehong), Cash Treasure, “Zhiyingbao”, wealth management, fixed deposit, and fund, of which the wealth management products of Cash Treasure are the most popular ones.
“On the precondition of meeting the customer need of capital security and regulatory requirements, we will launch more financial products suitable to the characteristics of direct bank, such as innovative trust, collective wealth management and assets management products, and precious metal products.” All of these products, Yang said will come from inside IB Group. The third-party wealth management platform is not taken into consideration temporarily, nor would the Bank pursue after a broad coverage of all product families blindly. It will only offer competitive characteristic products.
For direct bank institutions in the banking system, a great challenge is product homogenization. For this reason, IB has always been making active exploration and attempts. Considering policies, now only CMB has launched a product similar to P2P in the whole banking industry and all other banks haven't launched any officially. Nonetheless, banks including IB, SPDB and CMBC all have expressed their intentions to try P2P.
As disclosed by Yang, IB is now considering creating a product by taking the urban construction investment bond as the basic assets, and taking into consideration to launch businesses of P2P nature such as Business Bill and Business Loan.
For P2P, he indicated, IB wouldn't establish a P2P platform itself, but would rather plan to look for cooperation in direct bank with outstanding P2P companies in the vertical areas such as automobile loan and housing loan, and introduce insurance companies for third party insurance coverage. Because all banking P2P products should be approved by the China Banking Regulatory Commission (CBRC), the specific action should wait for the promulgation of regulatory rules for P2P by the CBRC.
“In the area of traffic guidance at entrances, the most pressing issue is to improve the brand reputation and customer conversion ratio of direct bank”, said Yang frankly.
At present, IB Direct Bank has covered the three user terminals, computer, mobile phone and iPad. In addition, one objective of the strategic cooperation with Baidu established last year is to carry out product marketing via Baidu Search.
In order to further boost internet traffic guidance, Yang indicated, IB will soon launch a new round of promotion activities for direct bank and WeChat banking. Next, it also plans to explore the traffic guidance at WeChat entrance in cooperation with WeChat.
No consideration of establishing a direct bank subsidiary temporarily
“The direct bank is born with different gene compared with the conventional banking. If a direct bank is established only within the boundary of the banking system, it will be dissimilated into another mobile banking system, thus losing its value of existence.” Jiang Jianming, General Manager of the Internet Finance Department of Bank of Jiangsu, stated in an article, in which the exploration and practice of Bank of Jiangsu in direct bank are taken as an example, that direct bank should be a legal person bank with independent license. At present, Yang said, IB Direct Bank exists in the form of internet financial platform rather than operates as a business division.
In this May, the reporter of 21st Century Business Herald, learnt frominside CMBC that the bank had submitted an application to the CBRC for establishing an independent legal person institution of direct bank.
“Now, our direct bank is running in the greater retail banking system”, Yang said, upon mentioning the direct bank model of ING, “and we haven't reached that stage. As our direct bank has been established for a short period, we should first run it stably. Of course, it is not impossible to do this in the future.” IB Direct Bank does not launch any plan of mortgage loan for housing for the time being, but some attempts will be made in the area of deposit pricing.
Yang said frankly the direct bank was still facing challenges in two areas: First, challenges encountered in the aspects of technology, talents, and management; second, some innovative services still need the approval of regulatory policies. Now, there are still some differences in the regulation of internet enterprises and financial enterprises engaging in identical businesses.