（http://paper.ce.cn/jjrb/html/2015-09/11/content_256115.htm）
Along with the rapid development of internet technology, the “on-line” degree of financial service is also deepening day after day. When internet banking and mobile banking are becoming standard tools for young clients, how should off-line outlets position itself? What kind of function should it play? As a result of operation transformation by small- and medium-sized commercial banks, community sub-branches, a special kind of outlets focused on “home-like service”, provide answer to the above questions. Recently, our reporter went to Chengdu, Sichuan Province to investigate the positioning and development of community sub-branches.
“Home-like Service” at outlets
In August, it sometimes shines brightly and sometimes rains gently in Chengdu. Walking about 5 minutes eastward from Jinsha relics, the reporter came to the Tongshenglu Community, Qingyang District, Chengdu. Xiao Xianzhen, a 73-year-old woman living alone, relies on bank's physical outlets due to inconvenience of movement and unfamiliarity with internet banking.
“After retirement, I wish to buy some wealth management products that ensure not to lose capital investment, after all, safety is my top priority for lifelong savings.” Xiao Xianzhen told the reporter that she really hoped there could have a bank outlet within the community, so she need not to go too far, and it would be better if she doesn't have to stand in a long queue to handle transactions.
In April 2014, Xiao Xianzhen found an outlet at the entrance of her community with a signboard “Tongshenglu Community Sub-Branch, Chengdu, IB”. Walking inside, she could not help wondering “Is it really a bank?”
Where are the differences between this one and traditional bank outlet? An outdoor green canopy and an array of umbrellas gripped the attention of the reporter.
Lying in an extended glass house with green plants and flowers, this quiet and confidential canopy is the wealth management room of the community sub-branch. At the moment, three persons were discussing. They were 55-year-old Mr Gong, who came to consult IB's “Enjoyable Life” wealth management plan, and two young staff at the sub-branch, both at their 26.
Pushing the door of the glass house, it is the two floors business hall of the community sub-branch. With 126 sqm, it looks a little bit “mini” comparing to traditional outlets. The wall was painted light yellow, and there are white fungus soup with lotus seeds, red bean and barley soup and mung bean shake etc in paper cup at the entrance. There are 6 districts in the outlet, including self-service, and counter service district as main business district, tea garden, reading and children playground extended further, and individual loan transaction district on the 2nd floor.
“Like home” is the most prominent feeling of many clients, and “home-like service” is exactly the features of many community sub-branches. Xiao Xianzhen said, in traditional outlet, transaction are handled through glass board, and here at community sub-branch, it is face to face consulting, and client may even chat with staff at sofa.
The high counter is absent here because community sub-branches are not permitted to handle cash service manually. Therefore, self-service machine becomes the main channel for cash transactions at community sub-branches. The reporter noticed that, besides common ATM, “self-service card issuing machine” is an important point distinguishing community sub-branch from traditional outlet. At self-service card issuing machine, a client may apply for new debit card after verification of identity, and the machine can make and issue card on site. Moreover, clients can also handle other transactions, like payment of utilities charges, mobile phone top-up, transfer and purchase of wealth management products etc via such machines.
Accordingly, the staffing of sub-branch is also simplified. The regulation requires 3 persons, no more than 4 persons, so the IB's community sub-branch at Tongshenglu is “enhanced version”. Regarding division of labour, Xue Chengcheng, the sub-branch manager is responsible mainly for counter service, Han Feiyi, Guo Wei and Li Xinwei are responsible for consulting, sales of wealth management products, wealth management planning and cooperation and extension of business circles.
Besides special layout and face to face service, another feature of the community sub-branch is public benefits activities, such as financial lectures, anti-illegal fund-raising class etc, mostly targeting at middle-aged and elderly clients.
“These young staff at community sub-branch are really helpful. When they understood my wealth management needs, they recommended relevant products immediately, and taught me how to use ATM and self-service card issuing machine.” said Xiao Xianzhen. As they meet each other frequently in the same community, she is really trusting these staff over some time.
“If traditional banking outlets are heavy equipped ‘armored division’, then community sub-branches are ‘light cavalry’, we hope to jump out of banking business, and integrate into residents with quality service.” Tang Hao, the vice GM of Product and Operation Department, IB Chengdu Branch reckons that, despite rapid development of internet finance, it is just impossible to meet the needs of community residents for “last mile” physical outlets.
Gaps to “Inclusive Finance”
The intent to found community sub-branch is “inclusive”. Relevant principal at CBRC said, they encourage small and medium-sized banks to set up community sub-branches, in order to diversify financial service level, sink outlets gravity with dedicated community outlets, and increase the availability of financial service to individual clients, thus complement with large bank's services.
However, our reporter found that there are still gaps between community sub-branches to “Inclusive Finance”. Since the emergence in early 2013, 2-year-old community sub-branches still have a long way to go.
Specifically, it needs to improve in 3 areas. First, generally, community sub-branches do not handle corporate and manual cash transactions, which limit the scope of financial service. Second, as showed by statistics of several banks, the main clients of community sub-branch are middle-aged and elderly people, and coverage over young clients needs to strengthen. Third, to include young clients, online channel will be necessary. Inside professionals suggest that community sub-branches may take the advantage of “Internet+”, combine surrounding business circle as scenario, thus built one-stop comprehensive financial service supermarket and community financial ecosystem by focusing on mobile payment.
As to manual cash transactions, the regulatory body has not forbidden it totally, but most small-and medium-sized banks do not have the willingness to add manual cash transactions from the view of cost-effectiveness.
“The regulatory body actually did not close off the window of manual cash transactions completely.” said relevant principal at CBRC Sichuan Office. Manual cash businesses include opening account with cash, cash deposit, withdrawal and transfer of large amount of cash. For reasons of cash safety, management and other reasons, the outlets have to use “high counter” for such business, which requires more staff and operation management system and substantially increases cost for outlets.
“In the statement of regulatory notice, community sub-branch practices limited license operation. Generally no manual cash business is conducted, and cash business mainly handled via self-service machine.” relevant principal of CBRC Sichuan Office said, if community sub-branch is willing to set up “high counter” after cost calculating, the regulatory body may also, after evaluation and review, issue manual cash transaction license once it ascertains sub-branch in question meets the criteria.
However, several joint-stock commercial banks have no such intents at the moment. “At present, we can complement community sub-branches with traditional outlets of our bank.” said Tang Hao, the vice GM of Product and Operation Department, IB Chengdu Branch, they usually take traditional outlets as the center, and consider communities within a radius of 2.5 km.
Behind cost-effectiveness calculation, there is dispute over whether community sub-branch can reach sustainable development commercially. Chen Jinguang, Vice President of IB said that, the average cost of a community sub-branch is about 1 million yuan, roughly one seventh of traditional outlets. “At the beginning of construction, our most conservative estimate is to reach breakeven point within 5 years. And the data of the last complete accounting year shows that, over one third community sub-branches of IB have made profits, and the rest two third are expected to make profits in the second accounting year.” he believes that, such business mode can continue once cost is controllable and profitable.
Furthermore, in respect of enlarging clients base from middle aged and elderly people, Chen Jinguang said, in the future, community sub-branch will at one hand continue to go deep into pension finance, and at another hand connect online with offline by extending service to young clients, thus create sound experiences to clients of different age and characteristic in the whole community.
For this, Zeng Gang, director of Bank Study Division, Financial Institute of CASS, reckons that, in the times of “Internet+”, the strategy of community sub-branch has go beyond of outlet presence and staff and resources input, but concerns comprehensive planning of payment, product innovation, marketing and integration of O2O.
He pointed that, against the background of mobile internet, e-commerce is becoming more regional and community oriented. For community sub-branch, mobile e-commerce should be the entry point in establishing O2O marketing platform for surrounding merchants and residents. Specifically, for one side, they can scale up the development of mobile banking, and go deeper into mobile payment; on the other side, they can increase service scenario, expand business interaction with surrounding merchants, thus creating a community business circle based on community sub-branches.
“Community sub-branches are better positioned in acquiring 'soft information' of individual clients.” said a staff in channel department of a joint-stock commercial bank. As community sub-branch has face to face “low counter”, they can collect “soft information” about clients, such as their behaviors, attitudes and consumption preferences. Besides, via hard equipments like ATM and self-service card issuing machine, community sub-branches can also collect information about residents on online shopping, investment and wealth management and potential credits needs, thus resolving information asymmetry between merchants and clients, and playing a better role as information intermediary.
How to regulate “savage growth”
During investigation, our reporter also found some community sub-branches that have been closed for a long time. What's the problem with these sub-branches?
“These sub-branches were opened several years by themselves and have not obtained relevant licenses yet, so they have to suspend business temporarily.” a relevant principal at CBRC Sichuan Office said, since the beginning of 2013, several joint-stock commercial banks, especially China Mingsheng Bank, started to promote community sub-branch strategy vigorously.
However, in the process of “savage growth”, a series of problems emerge at community sub-branches, such as illegal presence, informal staff and illegal commission sales of wealth management products.
As learned by our reporter, there are mainly three modes of “voluntary” formed community sub-branches: First, “outlet sub-branches” in community of commercial bank, which still handle manual cash transactions; Second, “off-bank self-service outlet”, i.e. clients handle transactions via self-service machine instead of bank staff; and one between them combining “self-service” and “staff consulting”, and most consulting concerning sales of wealth management products.
These modes are also confusing individual clients. “The first one has signboard showing name of the sub-branch clearly, the second one are common ATM, and the third one looks like a bank but feels not, making us uncomfortable to handle transaction there.” said Mrs Xu Yuexin, lived in Wuhou District, Chengdu.
The abovementioned problems occurred exactly from the third mode. As introduced by relevant principal of CBRC Sichuan Office, the third mode is the product of “savage growth” of community sub-branches without sub-branch license, and is suspected of illegal presence. As they develop too fast to enlarge presence, some outlets use employee under dispatch system rather than formal bank staff, causing major operational and moral risks, particularly “deceptive deal” in illegal commission sales of wealth management products.
“For example, employees under dispatch system sell product of third party wealth management company in the third mode community sub-branch, often promising high returns. Clients may mistake that it's a legal product of the bank, only cannot cash the product at mature, and the salesperson is no longer at the sub-branch.” said an staff at CBRC Sichuan Office.
Therefore, it becomes an urgent problem for regulatory body to regulate community sub-branches.
In December 2013, CBRC released Notice on Matters Related to Establish Community Sub-Branches and Small-and Mini-sized Sub-Branches by Small-and Medium-sized Commercial Bank, requiring community sub-branches must operate with license, hence forbidding the third mode. After such regulation, “community bank” has been renamed as “community sub-branch”, as a simplified outlet of bank. They have to be staffed with 3-4 formal employee of relevant bank, and generally handle no manual cash transactions.
After that, various banks started to reorganize community sub-branches internally, and re-apply for approval according to regulatory requirements. Because of streamlining administration and delegating power to lower levels at CBRC, the approval authority of community sub-branches has been lowered to local CBRC, thus shortening the period of approval. The relevant principal at CBRC Sichuan Office stated that, CBRC will focus on “after evaluation” to local CBRC office, and may take back the authority and hold local CBRC office accountable if the latter is determined not performing its duty in market access supervision.
Besides, as our reporter learned from CBRC, community sub-branches enjoy “special treatment” in three areas: First, a bank may submit application to establish multiple community sub-branches at one time, i.e. “batch applications”; Second, the appointment of senior managers of sub-branches adopts report system, and qualification review is no more necessary; Third, it no longer distinguish “preparation” and “opening” stages, which will speed up the opening procedure.
“Generally, we can only open 2 to 3 traditional outlets every year, but for community sub-branches, we can apply 3 to 5 every time even multiple times every year. As long as the supervision evaluation of last submitted community sub-branches has been completely after its opening, we can submit next batch applications.” said a staff in channel department of a joint-stock commercial bank.
Supported by several policies of streamlining administration and delegating power to lower levels, community sub-branches have developed rapidly. The recent data from CBRC Sichuan Office shows that, in 2014, they approved establishment of 136 community sub-branches by joint-stock banks, in 2015, 118 community sub-branches by joint-stock banks are planned to establish. And data from CBRC Guangdong office shows that, as of end of June 2015, the office has approved the establishment of 199 community sub-branches, and 115 have already opened.