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According to PBOC, at the end of 2013 Q1, China’s bankcard consumption transaction volume and value rose rapidly by 44% and 60%, respectively. Interbank transactions made up the majority of total transaction volume and value – accounting for 56% and 77%, respectively. At the end of 2013 Q1, the total circulation of bankcard in China reached 3.6 billion, increasing by 19% year-on-year, with 3.3 billion debit cards and 343 million credit cards. The average bankcard consumption per person increased by 60% to 4900 RMB.
Based on data released from the PBOC, bank card issuance in Q1 has increased 4.5% compared to 2012 Q4 to reach a total of 3.69 billion cards issued. Within the issued 3.69 billion cards, the total number of debit cards issued was 3.65 billion and total credit card issuance reached to 0.34 billion. From Q1 2012, the issued bank cards have had a steady growing trend which indicates that bank cards have becoming more and more Important as a payment method in China. Domestically, 10.6 billion bank card transactions happened in Q1 2013, and the total transaction value was 100.27 trillion yuan which increased 23.9% and 19.3% compared to Q1 2012.
According to iResearch, the total transaction value of China’s 3rd party online payment in 2013 Q, for the first time, declined slightly from last quarter’s 1,065 billion to 1,018 billion, -4.4% quarter-on-quarter. After the staggering growth over the last ten years, China’s 3rd party online payment market has entered a more mature stage of development. This dip largely resulted from the increasing commoditized and homogenous products and services – 3rd party players need more innovative products to improve their services and boost their revenue in the future.
Alipay is still the biggest 3rd party player, accounting for 48% market share, followed by China UnionPay with 20% market share.
According to the annual reports released by city commercial banks, a lot of city commercial banks’ net profit growth rates in 2012 have shown a slowing down trend compared to 2011. For example, in 2011, both net profit growth rates of Hankou Bank and Bank of Chengdu were close to 50%, however, both of them shown a dramatic decrease as the end of 2012. Also, the net profit growth of the two listed city commercial banks - Bank of Nanjing and Bank of Ningbo, are showing a significant decline in 2012.
Lower net profit is putting a lot of pressure to Chinese commercial banks in 2013, and the figures implies that city commercial banks have to seek for new business and products to reboot high profit in 2013.
As the end of 2012, the total number of Chinese online banking registered users reached about 489 million. More specifically, according to the data released from Cebnet, CCB’s online banking customers increased to 119.26 million, jumping by 41% from 2011 to 2012. The number of BOC’s online banking customers has reached to 91.42 million, with a year-on-year growth rate of 66%.
Because of the dramatic increase in the number of online banking users, banks such as ICBC and CCB have launched more innovative personal banking services such as social insurance and wealth management services.
Recently, China UnionPay (CUP) and Xinhua News Agency jointly released the Xinhua • CUP Bankcard Consumer Confidence Index (BCCI) for March 2013. It shows that the BCCI is currently at 87.20, growing by 1% month-to-month and 0.43% year-on-year. Generally, the more consumption expenditure on non-necessities, the better macroeconomic situation and personal income reflected, and the more optimism consumers hold towards the future economic situation and personal income.
Based on the transaction information of bankcard consumption by urban residents, this BCCI reflects the confidence level of the consumers towards macro-economy by analyzing the changes to the structure of the bankcard consumption expenditure (mainly the change in the proportion of non-necessities to total consumption amount). Chinese government’s further push on domestic consumption will continue to drive the steady growth of BCCI.
According to Beijing’s government, the total transaction value of e-commerce in Beijing, one of biggest cities in China, grew by 45% to 550 billion RMB in 2012. Beijing’s e-commerce market is characterized by its high transaction volume, which has prompted half of China's top 10 e-commerce companies set up headquarters in Beijing in often in one of the two national e-commerce industry zones which attract a great number of small and medium e-commerce firms. Beijing’s government expects that its e-commerce transaction value will grow at 22% CAGR and hit 1 trillion RMB in 2015, which will account for 60% of Beijing’s GDP.
According to the CBRC, China’s commercial banks announced a total net profit of 1.24 trillion RMB in 2012, with the total net profit of the 16 listed banks comprising 1.03 trillion of that total. Among these 16 listed banks, the five major banks ICBC, ABC, BOC, CCB, and BOCom earned 239, 145, 139, 194, and 58 billion RMB respectively in 2012. China Merchants Bank (CMB) made 45.3 billion RMB net profit in 2012, topping other joint-stock banks. Bank of Beijing, as the leading city commercial bank in China, earned 11.7 billion RMB net profit last year. However, the overall net profit growth rate of China’s commercial banks has declined compared to 2011 apparently due to the process of interest marketization which has deceased interest based revenue recently.
Recently, Alipay, China’s largest third-party payment company, released its sound wave payment mobile product, which is the first time that “sound payments” have been commercialized in China. Customers can now pay for goods from the vending machines deployed by Alipay in Beijing’s subway through the sound wave payment.
According to the China Securities Journal, the quality of credit assets is again appearing as an issue for Chinese banks. The latest annual report shows that the non-performing loan (NPL) balance and non-performing loan (NPL) ratio both increased in 2012, a sharp move from the “double decreasing” in both NPL balance and NPL ratio in the previous years.
The total NPL balance in the 11 listed banks was ¥385.38 billion in 2012 with a YOY growth rate of 8.1% compared to ¥356.6 billion in 2011. China Construction Bank believes the upward trend in NPL is due to the macroeconomic fluctuations in manufacturing, wholesale and retail trade, and real estate.
According to CCW Research, a local Chinese IT market research company, China’s financial industry IT software spend in 2012 grew to 49 billion RMB and the spending will keep a steady growth in 2013. Banking segment spend is a key driver, making up about 72% of total spend. Comprehensive risk management and big data are the main IT focus areas for banks.
As securities companies continuously launch new business, CCW estimates that IT spending on new business-related solutions in the securities sub-segment will increase considerably in future.
For insurance companies, the overall IT infrastructure is still very nascent. Large players will invest more money into the development and update of core systems.
Last month, China Mobile, the biggest mobile network operator (MNO) in China, and China UnionPay (CUP) unveiled their latest mobile payment product – “Mobile Wallet”- at MWC 2013 (Mobile Word Congress, the world’s premier mobile industry event).
In a recent article, the Wall Street Journal wrote about how although mobile payments are slow to take off in China, telephone or 'fixed-line' payments are actually doing quite well and actually hugely dwarfs mobile payments. When you consider the history of the 5 major banks and their alignment with particular sectors, it's no surprise that the Agricultural Bank of China would be leveraging this kind of business model, but what is interesting is the way that the model completely avoids mobile payments. It's almost as if the bank (industry?) in China is saying 'ok, so no standards on mobile, we'll innovate with what we have.' Which is actually not tremendously different that what we're seeing in other markets where the adoption of a consistent mobile payments standard seems inconsistent at best...
The 2nd Annual eTail Conference was held from 27th to 28th November, 2012 in Shanghai. Kapronasia was invited to attend the event to speak on a few payment related topics along with other industry experts. The conference's topics included e-commerce trends and strategies, cross border shopping challenges, and IT implementation on e-payment.
China Mobile, the biggest mobile network operator in China, continues to grow its mobile payment business which was first launched in 2010. At the end of September 2012, China Mobile had 60 million registered mobile payment users with a total transaction value of reached 25 billion RMB, 2.5 times as much as in 2011.
In 2012, other key players in China’s mobile payment market also expanded their business. At the end of October 2012, the number of China Telecom’s mobile payment users exceeded 8 million; China UnionPay also announced that so far it has 4 million mobile payment users, compared with 2 million in 2011. The data from Alipay (China’s biggest third-party payment company) showed that as of the end of May 2012, Alipay had 10 million users conducting payment through their mobile phone and the number was increasing by about 90,000 every day.
We expect that China’s mobile payment business will grow faster in the future, with the number of mobile users surging to 400 million in 2015.