China Online Banking Development
China Online Banking Development
China is expected to become the largest information technology (IT) market in the world in the next five years, acknowledging that computers will be popular in Chinese families by that time.
China now ranks No.2 in Internet subscribers in the world. Owing to China's large population, the country's Internet market still has great potential.
Information technology has been utilized in almost all sectors of China's economy today. E-government, e-business, e-finance, and upgrading of state-owned enterprises will all provide more opportunities for the development of the industry in China.
Read the Memo sent out by Jaime about 2004 Mid-Year Offsite Business-planning meeting conducted by S1 management team, the key topic of "Perfecting our International and Distribution Business" caught my attention. Learned the news that Macau Tai Fung bank implemented S1 Banking Solution to launched its online banking services, and found out that S1 opened an office in Beijing - China's capital city, I got a feeling that S1 already turned its eyes to Chinese Market and wonder whether S1's management would like to make further moves and seize the opportunity.
Before left China to immigrant to Canada, I had 6 years working experiences in Beijing-my home city, dealing with Chinese financial agencies and institutions, Chinese and foreign banks as well as other financial institutions and service providers in China, I'm quite familiar with Chinese financial industry structure. I'd like to reuse my knowledge and made this online research report.
If S1 is interested in expanding business in China, but not clear what is the situation there and where to start, my research report will, I hope to a certain extent, answer some of your questions.
The main purpose of this report is to provide some information and personal suggestions that, I hope, could be helpful for S1's management or marketing team to better understand Chinese market.
This report includes information covering Chinese banking system structure, the emergence and development of Internet banking and online insurance services in China, Chinese governments' policies and regulations toward online banking and insurance business as well as some prepositional thoughts about how to present S1 and its products to China.
Naissance of Online Banking in China
In the late 1990s, China began allowing banks to open online businesses. In 1996, China Merchants Bank launched the 1st online financing service in China through "All in One Net", an online payment method, which set up the basic operating pattern of China online banking. On October 1997, the Industrial and Commercial Bank of China (ICBC) established its own homepage on Internet to promote its financing services and to provide business guide for Internet users. March 1998, Bank of China successfully handled its first e-transaction. To 1999, all major banks in China had sped up their online banking construction. To date, online banking has made good progress in China.
According to statistics from the recently seminar called "International Symposium on the Development of Online Banking and Supervision" sponsored by China Banking Regulatory Commission, China's online bank transactions are expected to reach 20 trillion yuan (about 2.4 trillion US dollars) by the end of this year. Currently, China has over 40 million individuals and 60,000 companies and institutions involved in online banking businesses
In 2003, Internet-based banking businesses have witnessed a big step forward, owing to the outbreak of SARS (Severe Acute Respiratory Syndrome). Traditionally, Chinese have placed a premium on face-to-face meeting for important business-related matters, ...
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According to statistics from the recently seminar called "International Symposium on the Development of Online Banking and Supervision" sponsored by China Banking Regulatory Commission, China's online bank transactions are expected to reach 20 trillion yuan (about 2.4 trillion US dollars) by the end of this year. Currently, China has over 40 million individuals and 60,000 companies and institutions involved in online banking businesses
In 2003, Internet-based banking businesses have witnessed a big step forward, owing to the outbreak of SARS (Severe Acute Respiratory Syndrome). Traditionally, Chinese have placed a premium on face-to-face meeting for important business-related matters, but the SARS crisis has forced people to change their attitude.
Online Banking Development in China
China is in the early stages of a vast transformation - from a traditional "cash and carry" banking system where customers use the branches for almost every banking activity to a modern Internet banking system.
Currently, more than 50 commercial banks (domestic and foreign) and over 200 of their branches in China have opened websites, among which, a total of over 50 banks have launched online businesses.
The Growth of Online Banking Customers in China
China's online bank transactions were 14.3 billion yuan in 2001, increased to 21.8 billion yuan in 2003, and are expected to reach 20 trillion yuan (about 2.4 trillion US dollars) by the end of this year.
Figure 3.1: The Growth of Online Banking Customers in China
Online Shopping Payment Methods in China
According to a survey made by China Internet Network Information Center (CNNIC), payment online by credit card and deposit card is becoming the 1st choice for online purchasing. The traditional payment method of payment on delivery by cash and postal remittance decreased 3.7% this year.
Figure 3.2: Online Purchasing Payment Methods in China
An analysis shows that security and service abilities are the main concerns for Chinese to use online banking services, 72. 2% of the people inquired care a lot about whether the banks can guarantee the safety of all transactions in their online services, 60.6% hope to see more functions and flexibilities.
Figure 3.3: Factors that that will attract Chinese to use online banking services
Both Chinese and foreign banks in China realized that the internet solutions provide clients with more channels to communicate with them and allow them to benefit from greater control and cost efficiency, which are top of mind for treasurers today.
Domestic Banks and Their Online Banking Services
For many Chinese, banking in general is a new experience and in an economy where cash remains important, so bank branches also provide security to customers. However, with accession to the World Trade Organization (WTO), China's major banks having to face competition, the local players are increasingly seeing their extensive and heavily manned branch networks as a liability.
More and more Chinese banks seem to have discovered the Internet as new source of revenue and the powerful attraction of Internet banking is reflected an attractive proposition.
The Chinese bank that has bee quickest off the mark in building Internet banking is China Merchant Bank, which launched the first online financing service in China in 1996. The four state-owned commercial banks quickly followed and successively began to offer some online services since then.
May 2000, the Agricultural Bank of China (ABC) implemented a trial Internet banking service in its Guangzhou Branch, which allowed their customers in Guangdong province to access their account through Internet. December 2000, ABC launched online banking service in Shanghai called 95599 Online Bank.
The new service of 95599 Online bank has reportedly attracted a number of large corporate clients, such as China Worldbest Group and Shanghai Volkswagen. The services offered include currency exchange, personal cheque issuance and access to consumer loans. Users can also report the loss of certificates of deposit, bankbooks and bankcards as well as prearrange withdrawals of cash sums.
At the same time, China Construction Bank (CCB) announced its plans to extend its online banking services to 15 cities in the mainland as well as simplify the process of related authentication in a bid to boost the number of clients using online services. The bank began offering online services in April 2000 in cities of Beijing, Guangzhou, Shenzhen and Qingdao.
Last year, the Industrial and Commercial Bank of China (ICBC) unveiled a new platform for its personal online banking business - BANKING@HOME. ICBC officials said the upgraded e-banking platform could facilitate a key shift of the bank's outlets from all-round functions to sales-orientated services, and gives it a firmer foothold in a market with intensifying foreign competition.
ICBC officials said the 58-function brand-name allows "almost all services a traditional banking outlet offers'' to be processed by the client on the computer, including 24-hour any-amount transfers of funds or remittances, securities and foreign currency trading as well as collateralized loans.
Figure 3.4: Internet Services provided by the 4 state-owned commercial banks
Name
Website URL
Language
Internet Services
The Agricultural Bank of China (ABC)
www.abocn.com
- Chinese
- Simplified
Banking industry news and website news,
Regulation for foreign currency deposits
Link to online banking
Bank of China (BOC)
www.bank-of-china.com
- Chinese Simplified
- English
Link to branch offices in other cities and provinces
Link to E-banking services
Cash management
Information on the bank and its activities
Information on credit card
deposits online and phone banking, loans and remittances.
China Construction Bank
www.ccb-on-line.com
- Chinese Simplified
- English
Links to exchange rates, stock quotes, deposit rates, loan rates, bank fees.Link to branch offices in other cities and provinces
Credit card information
International Operations such as financing, merchant banking, international settlements, currency exchange, treasury services, credit investigations
Information on oversea branches and domestic branches that conduct international transactions
Foreign currency deposit, multi-currency remittances, account settlement and term deposit.
Link to online banking and payment
The Industrial and Commercial Bank of China (ICBC)
www.icbc.com.cn
- Chinese Simplified
- Chinese Traditional
- English
Link to branch offices in other cities and provinces
Link to online bank services: personal banking, corporate Banking
Information on E-banking
Online financing
Links to exchange rates, stock quotes, deposit rates, loan rates, bank fees.
Foreign Banks and Their Online Banking Services
Citibank claims that they are the 1st foreign bank in China that obtained approval from the People's Bank of China (PCBC) to offer Internet banking services in China to both domestic and international corporations, as well as consumers. Its Internet banking services provide clients with convenient, easy-to-use, and secure access to banking transactions, 24 hours a day, seven days a week, over the Web.
Offering its CitiDirect corporate banking service for cash management, the bank has developed an internet-based payments system specifically for the country. The system enables corporate clients in China to make local currency (renminbi) payment transactions to beneficiaries in over 7000 locations. The system, called Citibank Easy Payments, also delivers various payment and collections reports for clients to view or download into their computers.
Its Internet-based banking services available in China for corporate and consumer clients include:
* CitiDirect(r) Online Banking is Citibank's Web-based delivery channel for corporate clients, designed to securely deliver online an ever-expanding array of Citibank transaction products. CitiDirect(r) Online Banking provides access to account information, payment initiation capabilities, collections data, trade finance transactions, and import/export file integration capabilities. CitiDirect(r) replaces traditional electronic banking applications with a single Web-based delivery channel, thereby improving efficiency and reducing costs to clients. Available in 90 countries and 20 languages including traditional and simplified Chinese, CitiDirectâ Online Banking gives clients the benefits of real-time processing, robust security and integration with their in-house treasury systems.
* Citibank Easy Payments, an Internet-based payment system that allows corporate clients in China to make local currency (Renminbi) payment transactions to beneficiaries in over 7000 locations in China. This system was specifically developed for the China market. Citibank Easy Payments also delivers various payment and collections reports for clients to view or download into their computers. Citibank Easy Payments supports interface with all major Enterprise Resource Planning (ERP) packages such as SAP, Oracle, BPCS as well as locally developed Chinese accounting packages.
* Citibank.com.cn, an Internet banking portal that allows corporations and consumers to manage their accounts online, make online enquiries or transactions, view customize and personalize pages as well as get online tools and real-time global market information.
Global banking group HSBC, Hang Seng Bank and Bank of East Asia received online-banking license and launched online banking service in China on January 2003. This new service allows their customers to check their balances, transfer funds, make time deposits and account enquiries, check interest and foreign exchange rates, and send remittance instructions through Internet.
It is said that more foreign banks, like London-based Standard Chartered Bank, have also received approval to launch online banking services in China, but it is not clear when the emerging market specialist would offer such service.
