Digital transformation has entered a new stage Bankers discuss the construction of digital finance in commercial banks

With the rapid development of the digital economy, digital capabilities have become one of the core competitiveness of banks. Banks' investment in fintech has shown a steady increase in the overall trend. According to EY statistics, a total of 22 listed banks have disclosed the amount and growth rate of their investment in fintech (information technology) for three consecutive years. The proportion of these banks' investment in fintech as a percentage of operating income increased from 3.11% in 2021 to 3.50% in 2022 and 3.76% in 2023.

At the "2024 Digital Cloud Force Conference - New Power Digital Finance Forum" held on May 15, Chen Tiegang, deputy general manager of the financial technology department of the Industrial and Commercial Bank of China, said in his speech that major commercial banks in mainland China have gone through the digital 1.0 stage characterized by electronic informatization and digital technology to promote business development, and are accelerating the start of the digital 2.0 stage characterized by intelligence and openness and leading comprehensive transformation with digital technology.

At the forum, people from Minsheng Bank, Huaxia Bank, China CITIC Bank and other institutions discussed topics such as the development of digital finance and digital transformation of banks.

Listed banks have steadily increased their investment in fintech

Recently, EY released the 2023 Review and Future Outlook of China's Listed Banks (hereinafter referred to as the "Outlook"). It shows that with the continuous deepening of digital transformation, the technology investment of listed banks has gradually entered a period of steady growth. In addition to the data on the amount of investment in fintech (information technology) disclosed by the above 22 listed banks for three consecutive years, the Outlook also presents more relevant data. In 2023, 25 listed banks disclosed the amount of technology investment, totaling RMB197.012 billion, and 27 listed banks disclosed the number of fintech (information technology) personnel, with a total of more than 144,200 related scientific and technological personnel. According to the data of 25 listed banks that have disclosed the number of fintech personnel in the last three years, the proportion of the number of fintech personnel has continued to rise, from 5.04% in 2021 to 5.98% in 2023.

According to the 2023 performance reports released by 15 large and medium-sized listed banks, in terms of financial technology (information technology) investment, 6 large banks invested a total of RMB 122.822 billion, accounting for 3.48% of operating income, up from 3.30% in 2022. In 2023, the nine national joint-stock banks invested RMB65.235 billion in fintech, accounting for 4.35% of their operating revenue, up from 3.91% in 2022.

Zhang Bin, Chief Information Officer of China Minsheng Bank, said that China Minsheng Bank has achieved remarkable results in the construction of digital finance through overall planning, giving full play to the role of mechanism and culture, increasing investment in talents and technology, formulating and implementing science and technology planning and data strategies, and the "flywheel effect" of the bank's digital transformation is becoming increasingly apparent. Looking forward to the future, on the basis of the achievements already made, Minsheng Bank will make full use of emerging technologies such as generative artificial intelligence represented by large language models, actively integrate into the overall situation of social and economic development and Chinese-style modernization, and push the construction of digital finance to a higher level under the goal and framework of building a financial power and "doing a good job in five major articles".

Li Zhongming, deputy director of Huaxia Bank's Digital Transformation Promotion Office, said that in terms of digital transformation, Huaxia Bank focuses on promoting the construction of ten major areas, including open ecology, precision marketing, intelligent risk control, flexible organization, talent team and data-driven. Customer growth is gradually shifting to ecological customer operations and scenario customer acquisition.

In terms of the construction and training of digital talent system, Li Zhongming said that Huaxia Bank has improved the digital ability of employees and promoted the in-depth development of digital transformation by defining digital talent standards, building a digital curriculum system, and batch hierarchical and classified training.

Shift from product-centric to customer-centric

In their 2023 earnings reports, a number of banks continue to propose digital transformation to drive business growth with technology. Taking the retail business as an example, Bank of Communications proposed to actively promote the digital transformation of retail, establish an integrated "online + offline" full-process service system, enrich financial service scenarios, and strengthen the effectiveness of omni-channel and all-scenario customer acquisition. China Merchants Bank proposed to "accelerate the transformation and upgrading from 'online retail' to 'digital and intelligent retail', build a smart wealth engine and a smart customer service engine, and accumulate digital capabilities".

Combined with the strategy and focus of customer group management in the retail banking business of China CITIC Bank, Yuan Dongning, Deputy General Manager of the Wealth Management Department of China CITIC Bank, emphasized the importance of customer segmentation, segmentation and classification in the high-quality development of actual customer operation. He pointed out that banks need to match different operating systems according to resource endowments and investment characteristics to form a leading customer group structure.

Yuan Dongning said that banks should start from the perspective of customers and see the potential value of customers, not just bank assets. China CITIC Bank pays attention to the potential needs of specific customer groups in terms of going abroad and pension, as well as the operation of young customers, and guides financial needs through non-financial scenarios. China CITIC Bank has taken the lead in building a high-potential customer base through digital and intelligent ecological construction, using high-tech such as AI large models, customer behavior analysis, and marketing strategies to form a centralized operation model of the head office, shorten the operation link, improve operational efficiency, experience and value contribution, and explore a unique digital transformation path of wealth management for all customer segments, build industry-leading digital capability support, and achieve long-term battery life.

Tong Weiqiang, deputy general manager of the personal finance department of Bohai Bank, believes that different banks operate with different resource endowments, resulting in differences in advantageous customer groups. In terms of strategy, Bohai Bank adopts a hierarchical, grouped, and multi-wave omni-channel approach to carry out digital operation with customers as the center. By building a full-life-cycle, full-relationship map, omni-channel reach, and all-round customized intimate companion butler service, a digital management system for retail customers has been established, and a characteristic and comprehensive competitive advantage of Bohai Bank has been formed. In terms of the implementation mechanism, Bohai Bank pays attention to the three-level linkage of the head office and branches, and improves the insight capabilities of front-line customers and the systematization and agility of marketing strategies through management decision-making data analysis support and digital marketing tools, so as to promote business development more effectively.

Jin Mei, director of retail business of DCIT, said that banks are gradually shifting from product-centric to customer-centric, which requires the restructuring of bank resources. She observed two major trends: first, banks began to build a growth or membership system covering the entire retail customer base to comprehensively sort out resources such as customers, products, rights and interests, and channels, and find future value depressions; Second, banks have begun to select their own key customer groups to maximize the efficiency of resource allocation. These trends reflect banks' emphasis on customer segmentation and operational efficiency in the digital finance era, as well as their efforts to seek differentiation and precision marketing.