Financial Clouds come into Focus in China

Written by Leilei Wang || 07 Nov 2018

In China, financial cloud has become a key goal for financial institutions in 2016. According to ‘the 13th Five-year Plan’, by the end of 2020, banks’ online business system should all be transferred to cloud and more than 60% of their other business systems should be moved online. With this clear direction, banks are taking actions. The China Academy of Information and Communications Technology (CAICT) found that in 2017, 42% of financial institutions are applying to use cloud, whilst 47% are in the process of planning the transition to cloud as companies seek to establish agile banking infrastructure.

Providers include banks and technology companies

Big banks with similarly big budgets choose to form their own fintech teams or invest into external fintechs to acquire the technology. ICBC, the biggest commercial bank in China, set up a cloud team and started from Infrastructure as a Service (IaaS). As of December 2017, they had transferred 11 applications to their cloud platform, including a customer private banking and corporate banking system, which gives them a significant amount of additional capacity. More importantly, with their IaaS, ICBC can reach capacity peaks within seconds when needed for a new application. Other banks, like CCB and Industrial Bank, have also set up their own fintech subsidiaries with the goal of not just meeting their own internal needs, but also those of the market as many banks are starting to sell their services externally. 

Many of China's banks have chosen not to try building their own financial cloud system, which creates significant opportunities for vendors. In this market, Alibaba and Tencent are playing leading roles, followed by IBM, Huawei and Baidu. Minsheng Bank worked with Ali Financial Cloud. The new cloud system shortens each transaction processing time from 120 milliseconds to 50 milliseconds and increased peak transactions per second to 30,000 from 7,800. Bank of Nanjing’s average loan issue time now needs only 1 second. Tencent's financial cloud provides AI-driven customer service to help Citic Bank improve online customer experience. Quick and accurate responses are redefining the mobile banking convenience.

Meanwhile, risks around data security, service consistency, maintenance talent and audit still challenge the suppliers. In March, the CBRC led 16 banks and securities to form a financial cloud company, Rong Lian Yi Yun. The company is expected to play an important role in supervising the new type of service based on financial clouds. The role will be similar to Wanglian in third-party payment, and Xinlian in individual credit.

With the increasing competition on transaction speed and service quality, the market never lowers requirements for banks. Financial cloud can help them shorten application deployment time, save cost, and upgrade business without service breaks. Faster reaction to customer needs will assist financial institutions to gain more share while at the same time gaining agility and better control of and insight to their customer data. The service is not just for banks, but also to more than 120 securities, 160 insurance companies, and thousands of internet finance companies.

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