"Disappearing banks", standing on the digital inflection point

Image source @ Visual China

Text | Industrialist, author | Doudou, edited by | Piye

In a way, banks are standing at the inflection point of digital transformation. The corresponding options for this inflection point are whether to carry out the transformation and construction of the core system, whether to try to live broadcast, and the update iteration of the internal personnel and team of the bank.

"In a bank, the only mind-reading beast in the world is kept, and anyone who has evil intentions in the bank will be detected by it, and because of this, this bank has become the number one bank in the world..."

This is an interesting plot setting from the science fiction movie Doctor Who. Back to reality, in the banking industry, the "evil thoughts" of coveting money are everywhere.

"We are the procuratorate, and now you are listed as the subject of our investigation because of your suspicion of money laundering." Ms. Lan, a financial officer at a company in Foshan, suddenly received a call from a strange man.

During the conversation, the strange man used the suspicion of money laundering at work as an excuse that if Ms. Lan wanted to prove her innocence or avoid being implicated in crime, she must cooperate with her to transfer the company's money to a "safe account."

Subsequently, in just over 10 minutes, the company's 2.62 million yuan of unit funds were all transferred out.

If it is in the past, after the fraudsters have successfully succeeded, they will quickly transfer the funds to the account through online banking and other methods in the first time, and when the parties or enterprises realize that there is a problem, it is difficult to recover the losses.

But now it's different. The final result of the above case is that in the process of decentralizing the transfer of fraudulent funds by fraudsters, the bank risk monitoring platform automatically detected this abnormal transaction and timely activated the "smart freeze" function, successfully freezing 1.7484 million yuan of it, avoiding greater capital losses.

This is the risk control security system built by the bank itself, and connected to it is the digital operation system of the bank's entire financial security risk control. Digitalization and intelligence have become the "mind-reading beasts" of current banks.

In the current wave of digitalization, financial enterprises are often the benchmark cases that various industrial service providers must play. That is, once it wins a big customer in a financial industry, or a state-owned bank, it often verifies the strength of its product and service capabilities, which is a universal logic in the fields of cloud computing, database, and IT operation and maintenance.

Among them, as the most core unit of the financial industry, banks are often the most distinct digital nodes for these capability verifications, whether it is from the bottom cloud construction, or the middle layer of the database, IT operation and maintenance model, or the front-end digital staff, remote RPA, banks are becoming the best experimental field for financial digitalization.

Today, the soil for cultivation in this experimental field is becoming more and more complex.

On the one hand, as various state-owned large banks begin to realize the strategy of sinking to the third and fourth lines in 2021, the core problem they are gradually facing is how to realize the digital linkage of headquarters and outlets based on existing digital tools to avoid the connection gap between headquarters and outlets; on the other hand, with the sinking of state-owned large banks, the problem faced by local or private banks is how to achieve service and empowerment of regional customers through refined management.

For banks, for industrial service providers, this is not an easy to solve digital problem.

01 Hierarchical digitization of banks

"No one can hide from an account manager wearing a black suit or a white shirt and sweeping the building with a briefcase." This sentence refers to the salesman of the bank.

"Hello, I am an account manager of a bank, and now I can apply for a credit card from the bank, and I can collect gifts such as suitcases and small household appliances for free." Cheng Lei said this sentence hundreds of times a day.

As the most basic salesman of a bank, Cheng Lei sets off from the company every day and shuttles through various business office buildings in Beijing, looking for his next customer. He said bluntly: "All the customers in my hands run out with their legs. This job also allowed him to successfully complete a small goal in life. He joked, "I lost 15 pounds in just one month after I joined the company, and finally lost weight successfully." ”

This marketing phenomenon of "pushing customers" is not unique, and exists in all the different sizes of banks at present. And this seems to have become the most direct, crude and "thousand-year-old" way to obtain customers in the banking industry.

"All banks are talking about digitalization, but the lowest things can't reduce costs and increase efficiency, isn't this just talk on paper!" An industry insider complained to the industrialist. This has also become a microcosm of the current "unchanged" banking industry.

One of the "changes" corresponding to its "unchanged" is that in the general environment, customers' needs for financial storage business are changing.

Once upon a time, the most enthusiastic thing for the Chinese people was to deposit money in the bank, because it would get both the corresponding income and the gifts given by the bank.

However, with the emergence of monetary funds such as yu'e bao on the market, the fixed deposit interest rate given by bank deposits has long been useless, even if there are many gifts, the growth space brought by it has gradually peaked.

"I haven't been to a bank branch in the last six months. Last time, I ran to two banks in one go, looking for outlets, getting numbers, and waiting, which took more than an hour, just to reset the mobile phone number at the counter. ”

"It's been almost two months, and I haven't withdrawn any more cash through ATMs, and the occasional withdrawal is at an ATM in the subway station, not at a bank branch."

"On average, I make online payments three to five times a day, through WeChat Pay, Alipay or ApplePay, and never directly use the entrance provided by the bank to pay. For me, the existence of banks is a bit close to the communication operators, like mobile, Unicom, I use their services, but I don't have much intersection with them, and I don't even want to have more intersection with them. ”

It can be found that changes in both the user's cognition, behavior, or attitude are "drastic."

Under the impact of financial technology, especially in recent years, the leapfrog development of mobile payment, Internet wealth management and consumer finance, banks generally have a weak connection with users, and they do not understand users more and more, and gradually move away from their real needs.

Relevant data show that large banks, joint-stock banks and regional banks and other banks are "closing their doors", in the past four months, they have closed a total of 326 bank business outlets, the shutdown affected 29 provinces and municipalities directly under the central government, of which Zhejiang is the most tragic, a total of 42 outlets closed.

Objectively speaking, as mentioned above, the market environment, development stage and resource endowment of large banks, joint-stock banks and regional banks have gradually formed their own operating characteristics, and the internal problems brought about by them are also different.

The first is the large state-owned banks dominated by the six major state-owned banks of china, agriculture, industry, construction, communications, and postal savings banks, and their operations are characterized by their largeness and full bloom.

For large banks, the first problem is in the construction of digital infrastructure, such as the local deployment of private clouds, the construction of databases, along with the trend of national "de-IOE", banks need to find suppliers with sufficient carrying capacity to ensure the safe and smooth circulation of transaction data, such as distributed databases.

This is also the high point of competition between tencent cloud, Alibaba Cloud, HUAWEI CLOUD and other cloud vendors in the past few years.

Secondly, another core capability needed by state-owned large banks in promoting their digital strategy is cross-regional, cross-line, cross-departmental and cross-level overall coordination. Due to the large and comprehensive management characteristics, more emphasis is placed on the ability to build ecological aspects.

This need has been gradually met. "What we help CCB do is ecological operation and maintenance, but also platform operation and maintenance." Xu Yuyi, chairman of Guangtong Youyun, told us. Guangtong Youyun is an industrial service provider specializing in IT operation and maintenance, and in the past few years, it has helped CCB build an ecological operation and maintenance platform "Dragon Boat", which can realize the digital linkage and connection of headquarters and subordinate bank outlets.

In addition to the big banks, it is a joint-stock bank dominated by China Merchants Bank, Shanghai Pudong Development Bank, China CITIC Bank, Huaxia Bank, China Minsheng Bank, Guangfa Bank, Ping An Bank, etc. Its operating characteristics are to hold high and do excellent work.

For joint-stock banks, it pays attention to single-point breakthroughs, focuses on improving the advantages of business, pursues the ultimate, and strives to build a business leader.

In addition, regional banks represented by The Bank of Jiangsu, the Bank of Beijing, the Jiangnan Rural Commercial Bank, etc., are characterized by their deep local presence and different characteristics. Different from the business model of large state-owned banks and joint-stock banks, regional banks have a large gap in technology and volume, and the penetration rate of digitalization is also low, and the development situation is more severe.

The data shows that from 2013 to 2019, the overall performance of regional banks declined, the average ROE of the sample banks was only 10.2%, falling below the average of the banking industry, the scale growth rate fell by nearly 2/3, far exceeding the overall level of the banking industry, the non-performing rate nearly doubled and the asset quality continued to deteriorate, which was difficult to effectively curb. Regional banks are facing a crisis that is more severe than the banking sector as a whole.

From the perspective of digital transformation needs, unlike the "tall" services of large state-owned banks and joint-stock banks, regional banks are more exported to provide rapid response, close to customer needs, substantially greater than the form of "grounded gas, temperature" services, based on quality services to stick customers, such as based on remote services, customized services for in-depth tracking, to achieve inclusive finance and so on.

In other words, for banks of different sizes and different components, the digital transformation technologies they need are different at present, but at present, the digital transformation of banks is still more concentrated in the underlying infrastructure stage, and on the business process side such as the upper counter, the means of digitalization are still lackluster.

02 Banks digitize and fight with the "attitude of life and death war"

"We see digital transformation as an existential battle." On March 25, Industrial Bank President Tao Yiping said in his 2021 annual report.

From the perspective of investment, in this digital transformation battle, the digital investment of banks is an astronomical amount.

According to public data, Ping An Bank invested 7.383 billion yuan in 2021; China CITIC Bank invested 7.537 billion yuan; and China Merchants Bank, which is regarded as a "pioneer" in digital transformation, has not slowed down, investing 13.291 billion yuan in 2021.

Specifically, each bank has its own transformation progress:

For example, China Construction Bank, as one of the six state-owned banks, has carried out IT operation and maintenance of the market POC very early on, and has helped it sort out the digital model by introducing professional IT operation and maintenance service providers to build a basic ecological operation and maintenance framework.

From the perspective of specific operations, since 2010, CCB began to build a "new generation of core system construction project", which has invested more than 9,500 people, and after six and a half years of construction, it was successfully launched on June 24, 2017.

A brief description of the "new generation of core system construction project" is that CCB has broken up the digital shaft construction of the previously established departments and integrated them into a unified "aircraft carrier-level" platform for overall digital operation, including database re-selection, cloud privatization deployment, and agile development architecture redesign.

According to the data of CCB's 2020 annual report, CCB's financial technology investment in the same year was 22.109 billion yuan, an increase of 25.38% over the previous year, accounting for 2.93% of operating income.

It's a heavy enough investment.

Outside of CCB, China Merchants Bank is a more unique presence.

The digitalization of financial retail, the popular explanation is that China Merchants Bank's examination indicators for employees have changed from the inherent non-mass production rate and the first payment to MAU, a partial Internet-style inspection model.

This transformation is more in addition to technology, that is, CMB has taken the lead in realizing the digital transformation from the thinking, and achieving product sales through in-depth service to users. In fact, this is also the root behind CMB's "one body, two wings" strategy, that is, CMB's digital model will empower front-end account managers more, and account managers can serve enterprises and customers more deeply, thereby creating business growth under the depth of interaction.

"CMB is currently the best bank in china for digital operation and maintenance, and it really circulates data at all ends, so that front-end operators can quickly develop applications based on low-code capabilities, and then serve users and create digital stickiness." A financial veteran told us.

In addition to large state-owned banks and joint-stock banks, regional banks are also a special model.

Compared with the former two, more digital transformation of regional banks revolves around "refined empowerment", that is, achieving inclusiveness. What is needed is the ability of the full-end business side.

Taking Jiangsu Suning Bank as an example, its main business is to visit customers with difficulties in applying for online micro-commercial loans through offline and online methods, use PAD to achieve paperless input data, electronic credit contracts, and credit data imaging, and conduct online manual approval of these difficult customers based on manual offline visits. Another example is Jiangnan Rural Commercial Bank, which is based on the virtual digital human resources provided by JD Technology to provide remote financial services for regional customers.

It can be said that the digitalization of banks is now more and more presenting a unified demand point.

That is, in addition to platform operation and maintenance, digitalization is migrating more to the "retail" attribute, that is, from the early stage of the business center to the user-centric, whether it is the core system construction of CCB, or the low-code empowerment of front-end business personnel of CMB, or the in-depth operation of regional banks on users, all of which are migrated to the user side under the premise of ensuring business stability.

03 Banks evolve and stand at an inflection point

Overall, the digital transformation of banks has gone through 3 major stages.

The first stage is the electronic operation of the business. At the heart of the transformation is the electronicization of the core business. Representative transformation areas include core system construction, application and popularization of electronic tools in outlets, and application of risk control technologies such as U shield.

The second stage is the informatization of the management process. At the heart of the transformation is the universalization of management information systems. Representative transformation areas include marketing management system, customer relationship management system, reporting management system, business analysis system, data warehouse/data mart construction, etc.

The third stage is customer interaction mobility. The core of transformation is mobile channels and open ecosystem construction. Representative transformation areas include mobile banking construction, mobile payment system construction, offline product mobility, and open ecosystem construction.

For now, digital transformation within the banking industry is generally uneven. Whether it is the front-end core system construction, or the back-end "financial retail digitalization" system, there are some shortcomings, taking the core system as an example, although the major banks in the past two years have promoted domestic substitution in all aspects, but compared with the stability provided by "IOE", domestic manufacturers are still not up to standard in some aspects, and the intermediate process requires extensive manual intervention, and the final result is the "reverse result" of digitalization.

In addition, at the specific business level, few industrial service providers can provide mature digital capabilities for deep transaction banking. Especially for regional banks, thin investment makes it more difficult to make up for this shortcoming, and refined operation is far away.

But on the other hand, the demand market continues to explode.

In the digital transformation of the epidemic, the financing needs of enterprises have been infinitely magnified. According to the "2021 China Small and Medium-sized Enterprises Financing Development Report" released by iResearch, according to the economic contribution, the current loan space of small and medium-sized enterprises in mainland China is expected to be 1.5-2.3 times of the current scale; based on the financing demand of single households, the loan space is expected to be 2.7 times the current scale.

"The most difficult thing to do now is risk control, the non-performing rate during the epidemic has greatly increased, if the risk control capability can be increased, the bank's business will grow geometrically." A person working in the direction of banks told us.

In a way, banks are standing at the inflection point of digital transformation. The corresponding options for this inflection point are whether to carry out the transformation and construction of the core system, whether to try to live broadcast, and the update iteration of the internal personnel and team of the bank.

Whether it is a large state-owned bank or a regional bank, it needs more precise, safer and more professional organizational capabilities and technical means to reshape and build business models, and realize the refined management and operation of users under the premise of ensuring transaction security.

New attempts correspond to risks, but they also represent new opportunities in the future.

"We think that finance is still a stock market, and the key to the problem is who can come in and enjoy this stock." said the above-mentioned person.