Banks aim for comeback in retail payments

China banks that once dominated the consumer credit scene are fighting back and they are advised to make full use of data to develop new products, services and consumer experience. 

Wang Hailin, 30, is the typical target of a new offensive by China’s banks. They want his business.

Wang, a Shanghai mobile applications developer, lives a virtually cashless lifestyle. Almost all of his purchases and transactions are made via Alipay, a mobile payment platform run by Ant Financial Services Group, an arm of tech giant Alibaba.

His year-end Alipay statement for 2018 showed that he spent 57,669 yuan (US$ 8,504) on clothing, grooming products, dining out and daily expenditures.

He told Shanghai Daily that he has a Bank of Communications credit card with a credit line of 12,000 yuan, but he seldom uses it. Wang said he finds Ant Credit Pay, which also gives him a 12,000 yuan line of credit, easier to use.

“Convenience is king,” Wang said.

Globally, the US$700 billion payments market has long been dominated by banks, McKinsey & Co said in a recent report on the banking industry. But times are changing.

In China, soaring penetration into this lucrative market has been led by tech giants such as Alibaba, Tencent and Baidu. The market share of technology firms in the retail-payments market surged 10-fold to almost 50 percent in 2017 from just 5 percent in 2012.

China banks that once dominated the consumer credit scene are fighting back.

The banking card association launched a two-week discount campaign across the country during the Double 12 shopping festival last month in a bid to win more users.

China UnionPay, the world’s biggest card network with over 7 billion cards issued, said that it attracted more than 1 million new users for its mobile application on December 12 and the number of transactions soared more than fivefold from a year earlier during the first week of the discount campaign.

To offer its customers more choices at attractive prices, UnionPay has joined hands with 60 commercial banks and 400,000 merchants, both online and offline.

The banks’ offensive seems to be paying off.

In 2018, the number of people who used debit or credit cards for mobile payments surged 6 percent. UnionPay said that its mobile payment platform Yunshanfu has attracted 120 million users less than one year after its launch.

At the same time, users making online payments via shopping credit services like Jingdong Baitiao and Ant Credit Pay declined 6 percent, UnionPay’s report said.


Banks aim for comeback in retail payments

 But the battle is not over. More banks are joining the army to promote their own payment platforms.

China Construction Bank is one example. The state-owned commercial lender partnered with UnionPay in 2011 to explore the mobile payments market. Five years later, the bank introduced a flagship payment product called DragonPay.

During the Double 12 shopping spree, China Construction Bank put on splashy promotions to catch the attention of consumers.

Another player in the mix is Ping An Insurance (Group), a financial conglomerate in the world’s second-largest economy.

In early 2014, the company launched a mobile financial services platform called Yiqianbao, which features online payments and social networking services. So far, the platform has enjoyed some success in terms of numbers of users.

Strong promotion, Yiqianbao said, led to transactions on the platform of nearly 6 trillion yuan by the end of 2018, with registered users numbering about 200 million. A 10th of them are active users.

Industry watchers said the public tends to be very loyal to online payment platforms they have chosen because of safety concerns, making it difficult for new players to crack those allegiances.

Wang said he did notice UnionPay’s efforts to promote its mobile payment platform Yunshanfu, but he said has no plans to download the application and use it.

“For me, Alipay is good enough,” he explained.

However, for Guo Lanying, a lawyer in her 60s from Jilin Province, traditional banks seem more trustworthy when it comes to making payments.

Guo told Shanghai Daily that she began to use credit cards in the 1980s and now has six. She prefers to use bank cards on overseas trips and for expensive items like air tickets and big-ticket merchandise. For petty daily expenses, she often pays by scanning a Quick Response code.

McKinsey said in its report that tightened regulations on digital services have improved the window of opportunity for Chinese banks to become part of the booming mobile payments market.

Recently, Chinese authorities have implemented stricter rules on mobile payments and other digital services to reduce misuse and strengthen the digital economy. The new regulations may lead to a temporary slowdown in technological developments, allowing traditional banks to get up to speed, the global management consulting firm said.

McKinsey said banks should make full use of the massive data at their fingerprints to develop new products, services and consumer experiences.

Data, “the new oil” of the information age, have traditionally given banks a significant advantage over other firms in the financial intermediation system. But unless they act decisively now, banking institutions could see that advantage erode quickly, McKinsey warned.


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