Chinese banks move online to cut out the middleman

Chinese banks move online to cut out the middleman

Staff Reporter

2013-11-12

To cope with the rise of online financial businesses, China’s commercial banks have introduced online platforms one after another, the Beijing-based China Securities Journal reports. Banks have felt the pressure of financial disintermediation brought about by the ocean of data available in the internet era, but at the same time they have been striving to be more competitive by digging deep into mounds of data. Financial disintermediation offers bank customers a means of directly engaging in financial activities without the guidance and support of bank personnel.In the information era some traditional banking businesses have been given new meaning and have had to reengineer their models, triggering profound changes in the services they offer, the report said.

Several banks have moved their supply-chain financial businesses online, the report said.

At the end of last year, Ping An Bank announced the launch of the “supply-chain finance 2.0” system, expanding its online supply-chain financial services, including prepaid online financing, inventory financing online, online reverse factoring, online financing with electronic warehouse receipts, and value-added information services, among others. Through these products, business clients can sign contracts, apply for finance, pledge online storage, and manage their inventory all via online operations.

In the third quarter, China Merchants Bank introduced its “intelligent supply-chain financial platform,” through which the bank can handle business through real-time analysis of information related to quota, transactions, funding and logistics, as well as automatic sensing and control of credit risk; while clients can measure the amount of money they can borrow when seeking finance, applying for loans online with automatic online approval.

China Minsheng Bank, China CITIC Bank and China Everbright Bank are also working on their supply-chain financial businesses, replacing their offline operations gradually with online intelligent systems.

One unnamed retail department source at China Merchants Bank said transactions which used to take more than a day at the quickest can now be completed in seconds via the online system, significantly increasing work efficiency and slicing operating costs.

The source said the online financial system also helps lower the financing threshold for small businesses, because the online automatic processing techniques can now easily handle lots of complicated but small loan approvals, while in the past, traditional offline models would have considered these small loans as costing too much and would have refused them.

As more and more internet companies are making moves towards online financial businesses, Ping An Bank Vice President Zhao Jicheng believes these internet firms will face some restrictions in the future because network tools cannot replace non-standardized products, and thus online financial services will face restrictions.

Zhao expects more integration between internet operations and traditional financial operations, because traditional models just aren’t good enough on their own.