Jiang Zhaohua of Hengfeng Bank: Ecological chain and platform finance are the direction of retail banking transformation

With the downward trend of the interest rate market, the net interest margin of commercial banks has gradually expanded, and the development of retail business is facing unprecedented pressure, and more and more commercial banks have joined the "revenue defense war". In the face of the new economic situation, how should commercial banks go on the road of retail?

Recently, Tsinghua Financial Review exclusively interviewed Jiang Zhaohua, Secretary of the Party Committee and President of Hengfeng Bank Suzhou Branch, to discuss issues related to the development of retail business in the new situation.

1. Population aging is also a "dividend"

Many countries around the world are facing the social problem of aging population, under the current economic situation, what opportunities and challenges do you think commercial banks will face in the development of retail business?

The opportunities faced by commercial banks in retail transformation can be simply summarized into three "dividends":

(1) Economic growth dividends for sustainable development. In the 40 years of China's economic reform, the country's total GDP has increased by 330 times, the per capita disposable income has increased by 210 times, the per capita income of Chinese urban residents has increased geometrically, and the middle and high-end customers have also increased geometrically. In my opinion, this is the biggest growth dividend for the transformation and development of commercial banks' retail business.

(2) Macro policy dividends of national financial reform. Over the years, the state has successively introduced a series of financial reform policies to serve the public and improve people's livelihood, and the political and people-oriented orientation of financial reform has become more prominent. For example, in the past, financial and wealth management services mainly focused on high-net-worth customer groups such as the middle class and the affluent class; The minimum sales threshold of bank wealth management products is 50,000 yuan, and after the implementation of the new regulations on asset management, bank wealth management products are reduced to one yuan.

(3) Population quality dividend in the process of aging. Population ageing is a global social issue. At present, the average life expectancy of the Chinese population is 78.1 years, and the elderly over 65 years old account for 14.5% of the total population, which will reach 19.5% in 2030 and 30.1% in 2045. In other words, after 20 years, 1/3 of the Chinese population will be elderly. Although the proportion of the elderly population is large, the quality of the elderly is very different. In 20 years, the elderly will not reject digital finance as much as today's elderly, nor will they resist the downward trend of financial products like today's elderly, they are familiar with finance, accustomed to the Internet, and more importantly, they have the minimum financial awareness of investment and financial management.

These changes have given unlimited growth space to the retail development of commercial banks. Although China's economy, like many countries in the world, is facing the growth pressure of economic transformation, and economic growth may slow down, the fundamentals of China's long-term economic growth have not changed, the development trend of residents' income "cake" getting bigger and bigger has not changed, and the growth momentum of commercial banks' retail development has not changed.

While we see the release of the "dividends" of retail business development, we should also be soberly aware that the retail business development of commercial banks is facing severe challenges.

Affected by the superposition of geopolitical conflicts, economic cycles and other factors, at present and for a long time, the concerns of residents' lack of investment confidence and weakening economic growth expectations still exist to varying degrees, and the development of retail banks is facing many uncertainties, which are highlighted in three aspects:

(1) The uncertainty of the decrease in the actual disposable income of residents. We must be highly vigilant against the uncertain risk of economic deflation, as the decline in residents' willingness to invest and consume, the lack of effective demand, the rise in the real price level, and the increase in inflation expectations.

(2) The uncertainty of the downward trend of the expected return of assets. In the context of slowing economic growth, bank wealth management breaks the unspoken rules of rigid payment, the yield of wealth management products declines, and even defaults are overdue, and the income does not meet expectations, or even falls below the net value will be very common. For bank customers, this is a huge test of psychological resilience.

(3) The uncertainty of the volatility of the gold foreign exchange market. With the intensification of geopolitics and international disputes, the price fluctuations of foreign exchange, gold, and commodities will also enter a rapid adjustment channel, and the uncertainty of the fluctuations in the prices of gold, foreign exchange, and commodities will increase. The uncertainty of weakening economic growth expectations also poses severe challenges to the transformation of commercial banks' retail business.

Second, the decline in revenue and the narrowing of net interest margin are only the appearance

Since the beginning of this year, the revenue growth of commercial banks has declined on a large scale, and the trend of net interest margin narrowing is still expanding. How do you think the role of the "ballast stone" of commercial banks' retail business should be played?

There is a common feature in the financial reports released by commercial banks this year: the revenue growth of the five major state-owned banks has declined without exception, only two of the 12 joint-stock banks have maintained growth, and the other banks have declined to varying degrees. There are three main factors for the analysis of the reasons for the decline in commercial banks' revenue:

(1) The economy continued to decline, and the quality of credit assets deteriorated, dragging down revenue growth. The deterioration of bank asset quality has dragged down the growth of bank loan interest income, which in turn has affected the growth of bank revenue.

(2) Banks reduce fees and profits to reduce the financing costs of enterprises. Commercial banks have reduced fees and concessions for small, medium and micro enterprises, lowered interest rates and repriced loans to lending enterprises, and actually lowered bank loan interest rates, resulting in revenue growth falling short of expectations, or even negative growth.

(3) Lowering deposit interest rates, and the growth of bank deposits did not meet expectations. The asymmetric reduction of deposit and loan interest rates certainly has the consideration of balancing the cost of bank liabilities, but the pressure on banks to stabilize and increase deposits is also facing the test of revenue growth. In the first four months of this year, the deposit growth of 12 joint-stock banks was negative, and the deposit growth did not meet expectations, which is also an important reason for the slowdown in the revenue growth of commercial banks.

Based on the changes in the current internal and external business environment, the development of retail business of commercial banks needs to make great efforts in the following aspects:

(1) Improve the ability of channels to acquire customers. The ecological chain and platform finance are used as customer acquisition channel resources for retail business, linking different industries and industries, docking and drainage with platform resources, and realizing resource sharing. Therefore, the stronger the "link" ability of the ecological chain, the stronger the bank's ability to acquire customers, the stronger the "integration" ability of platform resources, and the stronger the bank's product allocation ability.

(2) Enhance asset allocation capabilities. Match different product portfolio strategies according to the differences in customer risk appetite, and gradually realize the upgrade from single product sales to multiple product portfolios, and from financial product allocation to non-financial product superposition. One of the most important nodes in the construction of ecological chain and platform finance is to organically combine financial and non-financial needs to provide customers with diversified financial and non-financial services. For example, we integrate lawyers, doctors, education and other industry resources to provide non-financial overlay services for small and medium-sized business owners and mid-to-high-end customers, so as to meet the diversified service needs of mid-to-high-end customers.

(3) Enhance the comprehensive pricing ability of customers. The implementation of integrated operation and the improvement of the comprehensive pricing ability of retail customers are the basic skills of retail business transformation; It is necessary to establish an integrated front, middle and back office business model to improve the comprehensive pricing ability of retail business. "The east is not bright, the west is bright", "the loss in the embankment is replenished outside the embankment"; It is necessary to take basic customer groups such as retail finance, private manufacturing, and specialization, refinement, and innovation as the starting point to improve the comprehensive value contribution of customers, and tap the growth points of retail business development in the industrial chain.

3. Why are bank deposit and loan interest rates lowered?

Why are bank deposit and loan interest rates lowered? In the current new economic situation, can you predict the new trends in the development of retail business?

In the long run, the market space for the development of commercial banks' retail business is huge, but it should be noted that the transformation of commercial banks' retail business is a complex system project that cannot be achieved overnight. In the process of transformation and development of retail banks, it is necessary to pay close attention to the internal laws of retail business development and the new trends of external market changes. Judging from the current economic situation, the new trend of changes in the external market environment cannot be ignored.

(1) The trend of continuous decline in deposit and loan interest rates will not change in the short term. Judging from the current economic situation, the central bank needs to continue to play a guiding role in deposit and loan interest rates to regulate market demand. On the one hand, by lowering the deposit interest rate, more and more private capital will be "squeezed" out of the bank deposit system, and more and more private capital will leave the bank deposit system and flow into the real economy such as manufacturing, real estate, stock market, and foreign exchange market, so as to participate more in social and economic construction and make the water of social capital lively. On the other hand, by reducing the interest rate of bank loans, the financing burden of enterprises will be reduced and the operating costs of enterprises will be reduced.

(2) The trend of real estate stabilization and the restoration of residents' consumption level will not change. At present, the adjustment of the "bailout" and "one city, one policy" policy in the real estate market has been rolled out across the country, and the vast majority of cities have relaxed the policies of restricting purchases, sales and loans. The real estate market in many cities has shown signs of recovery, rebound and even activity. It is foreseeable that in the next 2-3 years, the real estate industry will enter a full recovery.

(3) The foreign exchange market, the gold market, and the capital market will be more ups and downs. At present, the international situation is complex and changeable, geopolitics, international disputes, local instability factors still exist, the US dollar interest rate cut is expected to strengthen, and the scientific and technological revolution continues to evolve, these factors are superimposed and intertwined, resulting in the international capital market, foreign exchange market, and gold market fluctuations.

4. Accelerate the transformation of retail business with the power of digitalization and new media

We know that digitalization and new media have had a profound impact on new retail. Under the current new economic situation, what do you think are the difficulties and priorities of commercial banks' retail transformation?

Due to the differences in business positioning and customer base, commercial banks have different driving points for retail business development. For leading commercial banks, the biggest difficulty lies in the lack of customer maintenance capabilities, and many banks are often unable to maintain a large number of individual customers. Many customers below 200,000 and 500,000 are in a state of "free-range", and this problem is particularly prominent in the five major state-owned banks and the leading joint-stock banks. For the vast majority of small and medium-sized commercial banks, the biggest difficulty lies in the lack of customer acquisition capabilities. Small and medium-sized banks have a single customer acquisition channel and a small number of basic customers, making it difficult to obtain massive data resources and sufficient customer information, while the technology system of small and medium-sized banks is backward and their comprehensive development capabilities are relatively weak.

I think the focus of retail banking transformation is on two main areas:

(1) Enhance the application capacity of digital and new media. Use digital means to improve customer acquisition capabilities, digital tools to improve asset allocation capabilities, and digital transactions to improve customer maintenance capabilities. For example, new media such as WeChat, Douyin, and Channels have become important channels for businesses to acquire customers and promote their products. Commercial banks should learn from new media and use the power of new media to accelerate the transformation of retail business.

(2) Enhance the integration ability of the ecological chain and platform finance. The essence of ecological chain and platform finance is to link different customers, different industries and different enterprises through the platform through platform construction, create a vertical ecological chain, build a horizontal ecosystem, use the platform as a medium, link ecological partners, and meet the diversified financial and non-financial service needs of customers, which is the direction of the strategic transformation of retail banks.

Fifth, "going from the south to the north" is the biggest problem of retail transformation

In your opinion, how should small and medium-sized banks grasp the relationship between the strategic positioning and strategy execution of retail transformation? What suggestions do you have for commercial banks to do a good job in the transformation of retail business in the future?

In practice, the strategic positioning of the retail transformation of many small and medium-sized banks points to "going east", but the implementation path of strategy implementation is "going west", and the "divergence" between strategic positioning and strategy implementation is the main reason for the failure of many small and medium-sized banks' retail transformation.

Retail strategic transformation is a systematic project, which cannot be achieved overnight, and requires real work and long-term efforts.

(1) Strengthen top-level design and pay close attention to strategic implementation. Maintain strategic focus, be a firm long-termist, and stick to a blueprint to the end. No matter how good the strategic plan is, no matter how good the strategic vision, if the order changes overnight, it will not be successful.

(2) Strengthen resource allocation, maintain tactical application coordination, and give sufficient and matching resource investment to retail transformation, which is an important strategic support for retail transformation and development.

(3) Establish a digital business philosophy and use scientific and technological means to solve practical problems. It is necessary to be good at using big data, artificial intelligence, cloud computing and other scientific and technological means to implement accurate customer portraits, solve the pain points and difficulties in production and operation, and improve the service capabilities of commercial banks.

Tsinghua Financial Review adheres to the original intention and mission of "advising financial policies and leading financial practice", and strives to develop towards the goal of a think-tank-type all-media platform focusing on the interpretation and advice of economic and financial policies. Banks are the backbone of finance in the mainland to support the real economy, and the high-quality development of the banking industry is inseparable from the continuous contribution of bankers, especially bankers. Since 2017, Tsinghua Financial Review has set up a special column called "Bankers' Discussions", aiming to build a platform for Chinese bankers to disseminate ideas, take the pulse of China's economy and finance, and provide suggestions and suggestions for the development of the industry. At the same time, Tsinghua Financial Review has held several forums on the high-quality development of China's banking industry and continuously released the research report of "Top 200 Chinese Banking Ranking" to provide theoretical data support and useful practical reference for the development of the entire banking industry.

Editor丨 Qin Ting, Lan Yinfan

Preliminary trial丨Xu Lanying

Final Review丨Zhang Wei