The Changing Face of Chinese Retail Banking

Written by Zennon Kapron || September 01 2011

Anyone who has lived long enough has their own China banking story. Mine was when I first arrived many years ago. My landlord banked with Bank of China (BOC) and I banked with the Industrial Commercial Bank of China (ICBC). At that time (2004), personal bank to bank transfers weren’t possible without a tremendous amount of paperwork, so once per month I would have to directly pay my rent via withdrawal / deposit. As banks typically closed at around 5pm, this meant it was a weekend exercise and one not easily accomplished.


It started out with getting the money. I would head over to ICBC and over the course of a few ATM withdrawals (~US$200 withdrawal limit each time) I would gather up my rent and after putting it in my bag, walk across the street to the Bank of China. At the time, the experience at the Bank of China was slightly more civilized than other banks. Rather than queuing by seat and moving a seat up as the next person was served, you actually received a number from a machine and then waited your turn.

As I was going through this process every month, I developed a sense of how long each person in front of me would take and this plus times the number of people would give me a rough idea of how long I would have to wait, which was usually 30-45 minutes. Some days I was lucky – I would go for a quick lunch and come back to find myself the next person in queue. Other days, not so much – I would return to find that my number had already passed or that I still had another 30 minutes to wait. In any case, when I got to the window, I gave the teller my landlords bank account details and then gave her a stack of money to deposit into his account. Interestingly enough, paper cheques are very very rarely used for personal transactions.

Flash forward to today and the situation has changed…well somewhat.

When I first came to China, I actually didn’t setup my account myself. I had come over with Intel and the HR operations department setup the account for me and passed me the card and ‘passbook’ (basically a small book where all the account transactions would be printed). Why did they do this? Well, typically corporations only paid salaries into one bank and in Intel’s case, it was ICBC. No choice of entering a routing number/sort code and a bank account to have your salary directly deposited into an account of your choice, here, you could have an account at any bank, as long as it was ICBC… And that is actually all I ever got from ICBC – the ATM card and the passbook. The ATM card itself doesn’t even have my name on it. I don’t receive statements and I have no idea if I have an account manager.

Recently, after a friend showed me the iphone banking application from China Merchants bank (CMB), I decided to revisit my banking situation. CMB is one of the newer Chinese join-stock commercial banks. Although the joint-stock commercial banks tend to not have as large of a distribution/branch network as the larger commercial banks like ICBC or BOC have, banks like CMB have differentiated themselves through technology and from what I had heard, better customer service. I decided to see for myself.

I have to say that I was impressed. When I entered the branch there was a reception table where the assistant branch manager quickly assessed my needs, gave me a number and had another member of his team help me fill out the account opening form. When I was done with the form, I took a seat in the waiting area. I had gone at lunch time, so was expecting a bit of a wait. The woman who had helped me fill out the form came over and checked on me a few times, but she didn’t have to much as within 10 minutes I was sitting in front of the teller who took my form and was already entering my details into the system.

He asked me a few more questions like if I wanted a debit card and internet banking or not. I said yes to both at which point he informed me that the internet banking would be in Chinese. I panicked slightly, but then regained my composure and with the confidence of someone who has a much better handle on Chinese than I do, I told him that it wouldn’t be a problem.

As he was typing away, I received a text message on my phone. When I checked it I realized that it was from the bank telling me how to log into the ebanking system. A few minutes later the teller handed me the ebanking USB security token AND my ATM/debit card and then I was finished. The entire process had taken about 20 minutes. I have lived in a few different countries in my life and I have to say that this was one of the quickest experiences that I’ve had in opening an account.

What China Merchants Bank (CMB) is doing, and what many other Chinese banks are realizing is that customer service counts. In other countries, banks have wavered back and forth on customer service based on changing market dynamics, and what they thought were changing customer demands. As China’s banking industry is much newer than most, there really hasn’t been this back and forth waver, for the most part, banking customer service of 10 years ago was fairly grim and has gradually gotten better without going backwards. Similarly, the breadth of the channel experience has only expanded. Now retail customers can connect through any number of channels – the sophistication of some, mobile as an example, sometimes greatly exceeding that of the US. There hasn’t been a shift from online to bricks and mortar, to online…etc..

It’s fairly clear that this trend will only continue as customers become wealthier and more demanding as the banking market itself will only get more competitive. This will drive the market for IT solutions that support both addressing a customer’s needs and delivery/channel requirements. But of course, the Chinese consumer is very different from the typical western consumer though and solutions need to be adapted to the local market needs and peculiarities.