Banks need to build effective ecosystems for transformation: McKinsey

Chinese banks need to build effective ecosystems for their further transformation, in a way to meet the customers’ end-to-end financial demands by integrating financial services and scenarios, according to the latest report by McKinsey& Company.

The ecosystem is a kind of extensive and dynamic industry alliance involving participants across the whole value chain, said John Qu, senior managing partner at McKinsey. For banks, such ecosystems can help them enhance their core capability of client operation and risk management.

Compared with the traditional way of business cooperation, cultivating such alliance will enable lenders to focus on industries which they have the best know-how instead of covering all trades and professions. It can also help traditional banks to make transformations from selling financial products to offering better client experience, the global consulting firm said.

Chinese Internet giants have been competing head-on against the traditional players in the financial space during the past few years. Thanks to their strong scenario-based operation ability, these new entrants have shown their strength in customer acquisition, user experience and product marketing, which forces banks to embrace technology and make tie-ups with these industry disruptors.

Facing the challenges posed by the Internet rivals, McKinsey advises lenders to choose suitable scenarios and industries to which they can deliver unique resources and values. It also encourages banks to make internal innovations by setting special funds and prompt staff to think and design products in an Internet way.

Joe Ngai, senior partner and head of McKinsey’s China business, noted that the traditional financial institutions tend to rely on channels like physical branches to expand their business, but now in China, “scenarios outweigh everything.”

The report added that banks should give full play to their advantages in corporate banking services and make a linkage within the ecosystem including its corporate, government and retail clients.

The offline outlets are among the key assets and resources for the traditional lenders, and they should build ecosystems both online and offline, McKinsey said.