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| It's Time for Local Banks to Pull up Their Socks |
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It's time for local banks to reconsider their strategies and come up with more innovative products and services for customers who might otherwise be wooed away by overseas rivals. Facing unprecedented competition from overseas banks, with four of them launching locally incorporated businesses on the mainland, domestic players are beginning to feel the need for a major paradigm shift. In "For the banking industry in Innovative products will appear in sectors including wealth management, e-banking payment, derivative transactions, intermediary business and private banking services, the regulator believes. For a long time, local banks in the city have been satisfied with just meeting the basic needs of customers and not actively pursuing changes. But as times change, customers have become techno-savvy and the threat from overseas rivals is far more real, the need for innovation is more pressing than ever. "Chinese commercial lenders are quickening their pace to institutionalize product innovation," the regulator said in a recent report. The banks are thus providing a wider range of wealth management products, becoming more active in renminbi derivative transactions, and offering new products to boost their housing mortgage lending business. Fee-based income generated by commercial banks in But the regulator has been quick to add that many banks are merely doing what others have already developed. Statistics from the Chinese central bank's Shanghai headquarters indicate that domestic institutions still heavily rely on profit from the traditional business, namely the spread between lending and deposit rates. But this could change as overseas competitors propel local lenders to innovate, the regulator believes. Foreign banks will focus on several categories of financial services in which they have better expertise and which have higher profit potential. These include intermediate businesses in foreign currency and money management. Christine Ip, country head of Consumer Banking at Standard Chartered Bank's "We know Chinese banks want to learn how international banks operate wealth management, innovate and provide quality service," she said. To gain a toehold in the mainland's competitive retail market, overseas institutions are bumping up efforts to put forward personalized products and services targeting high-end consumers. According to China UnionPay, all four overseas institutions that have been locally incorporated have contacted the nation's largest credit card company to seek support to enter that market. "They could offer very attractive personalized services with plastic cards that combine different features, which make them stand out from cards issued by their local rivals," said Yan Qiang, UnionPay's assistant president. "I'm convinced that foreign banks will improve the Chinese banking industry as a whole," said Fang Xinghai, deputy director of Shanghai Municipal Government Financial Services Office. (
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