Decoding Zhongyuan Bank's Digital Transformation Path: Business-Oriented and Bringing Data Elements to Greater Value

21st Century Business Herald reporter Tang Jing reported from Henan

In recent years, the mainland banking industry has basically formed a consensus that digital transformation is not just a task for the technology sector, but a systematic and major change from operation management, business model to organizational culture. However, how to give full play to the synergistic effect of data, technology and business, each bank has found different answers in practice.

As a city commercial bank in Henan Province, Zhongyuan Bank was newly established and merged from 13 municipal city commercial banks in Henan Province in 2014 and listed on the main board of the Hong Kong Stock Exchange in 2017. In May 2022, Zhongyuan Bank absorbed and merged Luoyang Bank, Pingdingshan Bank and Jiaozuo China Travel Bank, creating the "Henan Model" with the largest absorption and merger scale, the most stable process and the fastest speed in the history of the development of urban commercial banks in China, and also providing an important reference for the reform of urban commercial banks in other provinces.

After the completion of the merger, Zhongyuan Bank's total assets exceeded 1.3 trillion yuan, and its ranking among urban commercial banks in China jumped from 12th to 8th. For more than a year after the merger, Zhongyuan Bank's business operations have maintained a good development trend, and its main operating indicators have continued to grow steadily. According to the financial report, in the first half of this year, Zhongyuan Bank's assets increased by 2.70% from the end of the previous year to 1.36 trillion yuan, its operating income was 13.551 billion yuan, a year-on-year increase of 30.21%, and its profit before provision was 9.226 billion yuan, an increase of 27.7% year-on-year.

In addition, at present, the number of mobile APP users of Zhongyuan Bank has exceeded 15 million, and the scale of monthly active users is close to 4 million, both of which rank high among urban commercial banks in the country. With the help of the digital risk control system, the bank has issued more than 4 million credit cards.

Since the full launch of digital transformation in 2018, Zhongyuan Bank has made beneficial explorations in product creation, online and scenario construction around "agile delivery", and the application of big data in precision marketing, risk prevention and control, and customer experience improvement has also emerged, and the role of digital transformation in boosting Zhongyuan Bank's business has emerged.

Hu Hao, chief information officer of Zhongyuan Bank, told the 21st Century Business Herald reporter that one of the major starting points of Zhongyuan Bank's digital transformation is to vigorously promote "everyone uses data and everyone understands data" throughout the bank, cultivates a data-driven culture, and strives to improve the digital intelligence application ability of all employees. Both managers and front-line employees are gradually Xi using data to describe the problems encountered in daily work, so as to better analyze and solve problems with data. "With the power of data, we can better understand customers, markets, businesses, and generate insights to guide scientific decision-making in daily operation and management. ”

Foster a data-driven culture

Since its establishment in 2014, Zhongyuan Bank has attached great importance to the construction of financial technology, adhered to the development of science and technology, strengthened the basic capacity building of science and technology, continuously improved the level of digital application, and empowered the steady development of business. Hu Hao said that with the support of the top-level strategy and the great attention of the bank's leaders, the transmission mechanism and implementation process of Zhongyuan Bank's digital transformation are relatively smooth. At the same time, we adhere to the business application-oriented, starting from the construction of the retail digital marketing system, and promote the business departments to gradually recognize the business value of "technology + data".

Wang Junqiang, general manager of the retail finance department of Zhongyuan Bank, believes that digital transformation essentially changes the concept, products and channels, rather than the logic of the business itself. The logic of retail business has always been very clear, facing C-end customers, whether it is 10 years ago or now, the needs of customers are still saving, withdrawing, loans, transfers, remittances, payments and the preservation and appreciation of wealth. It's just that with the changes in the market, the products provided by banks are changing, the channels of services are changing, and the methods and contents of services are also changing.

Wang Junqiang observed that with the deepening of the digital transformation of Zhongyuan Bank in recent years, the way of thinking, working and expression of employees has changed greatly, which is a subtle process. "At present, the concept of digital marketing and digital risk control has been deeply rooted in the hearts of the people, and the results are obvious to all, but the degree of refinement is still promising, which requires us to further strengthen the retention and use of data and give full play to the value of data elements. ”

The reporter learned that in the process of in-depth digital transformation, Zhongyuan Bank used a variety of carriers and methods to carry out daily publicity of transformation work through graphics, texts, short videos, etc., released semi-monthly talks on digital and intelligent transformation, held "Zhongyuan Good Ideas" lean innovation activities, created a "Zhongyuan Burning Six Points" innovative thinking exchange Xi platform, held digital transformation exchange forums, etc., and continued to promote the concept of transformation inside and outside the bank and excellent cases.

Zhang Yantao, general manager of the corporate finance department of Zhongyuan Bank, told reporters that Zhongyuan Bank's data governance has laid a good foundation, the absorption and merger process is smooth and orderly, and the main line of transformation of online customer service, digital customer operation, scenario-based customer service and digital internal management has also been consistent.

"Online customer service is easy to understand, that is, to move offline business online, customer operation digitalization is more about using data to make a more accurate portrait of customers, so as to match more accurate services, customer service scenarios are based on the different business scenarios of customers to embed corresponding financial products, supply chain finance is a typical example. Zhang Yantao said.

As for the digitization of internal management, Zhang Yantao raised his mobile phone and showed reporters several indicators that he would pay attention to every day. "Whether it is the balance of deposits and loans, the customer's credit line or the progress of business approval, I only need to open our mobile office platform, Yuanxin App, to complete all the data inquiries and approvals required for internal management, which is the digitization of internal management. ”

Hu Hao also told reporters that the bank explores the assetization and value of the precipitated data, and creates data products for external output, such as some digital risk control products, as well as the ability of intelligent algorithm models, to empower and serve small and medium-sized financial institutions. In this way, data elements can not only serve the development of Zhongyuan Bank's own business, but also truly generate value to the outside world and form a new business model.

Strengthen the in-depth integration of industry and technology

For banks, the key to the success or failure of digital transformation is the deep integration of technology and business. Whether the application of digitalization can find the right entry point and scenario may be more important than the progress and application of the technology itself. "Digital transformation without business value is pseudo-transformation, and the role of technology is to empower business, which Zhongyuan Bank understands very deeply. Li Xiaodong, general manager of Zhongyuan Bank's Digital Intelligence Financial Innovation Laboratory and Financial Technology Department, said bluntly to reporters.

Li Xiaodong believes that the general direction of "online, intelligent, and open" digital transformation of the banking industry will not change, and the logic of "technology + data" two-way empowerment will not change, but a bank's digital transformation strategy should be adjusted in accordance with the direction of business strategy, and this adjustment is based on deep insight into the entire industry. As a provincial-level city commercial bank in Henan, Zhongyuan Bank needs to resonate with the high-quality development of Henan's economy, and the digital transformation should grow together with the adjustment of business strategy, so as to better serve business goals, assume social responsibilities, and contribute to high-quality development.

The reporter learned from the interview that the current organizational structure of Zhongyuan Bank's science and technology line mainly involves four departments, namely the Digital Intelligence Financial Innovation Laboratory, the Financial Technology Department, the Data Information Department and the Software R&D Center. The Digital Intelligence Finance Innovation Lab is a technology and business synergy promotion department, which is responsible for coordinating and promoting the strategic planning and practice of digital transformation of the whole bank, enabling the integration of industry and technology on the one hand, and promoting innovation on the other. The Fintech Department is the organization and management department of the Bank's information technology infrastructure, the Software R&D Center is mainly responsible for the construction of various business information systems of the Bank, and the Data Information Department is mainly responsible for the construction of data governance and data assets, basic data platforms and digital intelligence application systems.

"These four departments cooperate with each other, in accordance with the logic of 'strong back-end, large middle platform, and sensitive front-end', on the basis of doing a good job in business support, and gradually deepen data insights and intelligent applications, forming an organic whole of underlying scientific and technological capabilities to empower business applications. Li Xiaodong explained.

Hu Hao introduced that with the deepening of digital transformation, business departments have gradually realized the important value of data. For a long time, we have improved the business collaboration mechanism through the embedding and stationing of scientific and technological personnel. For example, since the end of last year, we have gradually embedded a group of data modelers into business departments to conduct data analysis and modeling based on actual business data needs, so that data can truly become the core value of empowering customer service, operation management, product creation and risk prevention and control. When technology personnel are deeply involved in the whole process of products and services from creation to launch, the communication barriers between business and technology are naturally broken.

Wang Junqiang told reporters that the organizational structure of traditional banks is silos, and in the past, to make a product or launch a service, from demand to development and then to promotion, it may need to span several departments, and the cooperation is often not close enough; now scientific and technological personnel have entered the business department, and the product and promotion staff have achieved the front, and the whole process can be completed within the business department, and the radius of communication and decision-making has become significantly shorter.

Zhang Yantao said that in recent years, Zhongyuan Bank has also set up a new type of position between business and technology personnel - demand analysts, who are mainly responsible for translating the language of business into the language of technology. "In the past, most business people didn't understand code or technology, and there were easy barriers to communication with the technology team. With a requirements analyst, they can explain the needs and ideas of the business people to the technical staff, and point out a rough implementation path. These people generally grow up from the backbone of the business, they don't necessarily have to be able to write code, but they must understand the basic logic of technology system construction. In addition, we have also established a mechanism for regular training and docking and communication between business and scientific personnel. ”

Zhang Yantao also showed reporters the "colleague circle" function in the Yuanxin App, the internal office software of Zhongyuan Bank. If the front-line personnel encounter a function of the system that is insensitive or inconvenient, they can ask questions in the "colleague circle" at any time, and there will be a special person in the background to monitor the generated problems in real time and contact them at any time to deal with the demands. Both "open" and "handled" issues will be published online, and the progress of the processing will be visible at a glance. In his opinion, this real-time and transparent online feedback mechanism has significantly improved the efficiency of solving problems, and the response to changes on the business side is also more agile.

Keep up with the trends of cutting-edge technology

Since the beginning of this year, ChatGPT has detonated a wave of generative AI development, and the banking industry, which has always attached importance to digital applications, is considered to be one of the important areas where generative AI technology can be applied on a large scale.

According to the Boston Consulting Group's (BCG) 2023 Generative AI Application Report, generative AI can be used in the banking industry through all aspects of the front, middle and back office, including marketing and sales, channels and operations, product development, investment advisory services, customer service, and risk compliance. Every line of business, every function of a bank, has the potential to find application scenarios for generative AI. If it can be applied on a large scale in the banking industry, it is expected to bring considerable benefits in reducing costs and increasing efficiency.

As the largest city commercial bank in Henan, Zhongyuan Bank has closely followed the important frontier of scientific and technological innovation, showing the market image of the "leader" of the financial army.

The reporter learned that Zhongyuan Bank actively explores the application of technological innovation such as big data and artificial intelligence, and has realized the implementation of innovative achievements in many fields such as knowledge quiz and intelligent risk control. The bank actively promotes the application of AIGC technology, carries out large-scale model docking tests with well-known Internet companies, does a good job in open-source large-scale model training and application technology reserves, and completes the pilot launch of scenarios such as enterprise knowledge quizzes and marketing copywriting. Xi As of the first half of 2023, 6,110 suspicious customers have been mined, 1,798 risks have been confirmed, and the balance of customer accounts has been retained by RMB 16.45 million.

Hu Hao believes that generative artificial intelligence technology is currently in the process of rapid iterative development, and everyone sees more general large models, but when it comes to enterprise-level applications, it is still necessary to explore the value scenarios in vertical fields to apply and land. The general model has a certain tolerance for illusions, but for banks, not all scenarios have a certain tolerance. In Hu Hao's view, the application of large model technology in banks should be combined with the maturity of technology development and gradually implemented.

He also revealed: "Zhongyuan Bank's current positioning of the large model is to empower people and use it as an intelligent assistant for people. First, we will help employees better obtain information and generate content for some scenarios with high tolerance inward, and of course, the next step may be to assist employees in logical reasoning and business decisions. ”

Hu Hao pointed out that the large model is essentially a probabilistic model, and there are still some problems in hallucination, poor interpretation and even data security risks, which cannot completely replace the judgment and decision-making power of bank professionals, and is more of an auxiliary and enabling role. With the maturity and evolution of technology, coupled with the accumulation and training of high-quality data, it can be implemented in some scenarios with high accuracy requirements.

As for the application of the next stage, Hu Hao said that Zhongyuan Bank should focus on integrating private data within the enterprise, build and precipitate high-quality datasets and knowledge bases, and then use the industry's mainstream general large model for fine-tuning training, so that it has the ability to vertical field scenarios, so that it can be embedded in bank-specific scenarios.

"Frankly speaking, the application of scenarios in vertical fields should also take into account the matching degree and input-output ratio of intelligent technologies, and large models do not necessarily need to be used for scenarios where small models are applicable. The machine Xi and deep Xi models we traditionally use are also trained with specific data for specific scenarios, but its ability to generalize to solve problems is limited, and it can often only be adapted to a specific scenario, but it may do a very good job. In Hu Hao's view, the application of large models in commercial banks should also be guided by actual business value, and there is no need to "call it a large model".

In the interview, the 21st Century Business Herald reporter found that both the technology line and the business line of Zhongyuan Bank have a more pragmatic attitude towards digital transformation, and they all agree that the application of digital technology should be based on business value, and truly create products that customers need and serve the business strategy of Zhongyuan Bank, which is the proper meaning of digital transformation. In addition, the "data-driven culture" advocated by Zhongyuan Bank is gradually becoming an important soft power for this local city commercial bank. In this era when data has gradually become the core competitiveness of enterprises, a new round of competition among commercial banks is still in its infancy, and a deep-seated transformation has just begun.

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