Direct Banking - Exploration of commercial bank transformation and development under internet finance era

Commercial banks are facing a more challenging macroeconomic condition: intensified credit risk, finance disintermediation, interest rate liberalization; and emergence of internet finance are weakening the traditional commercial banks competitiveness. In times of new normal economic condition and digitalization, strategic transformation has been extremely important for incumbents. The Financial Service team of Deloitte China has always been dedicated to study the development and changes of the industry, and Direct Banking – Exploration of commercial bank transformation and development under internet finance era was written based on the latest trend of development and industry experiences.

The emergence and rapid development of mobile internet creates new opportunities for commercial banks, which leads to the prospect of direct banking. Customers in digital age are in favor of value propositions centering rapid response, excellent customer experience, and good value to money. Rooted in innovation and customer centric concept, high quality products and services are able to be offered by the direct banking as the key enabler for traditional banks executing transformation strategy in digital era. In combining with global successful experiences and deep understanding of Chinese market, Deloitte believes the success of direct banking primarily relies on the three imperatives with focus on five operation areas:

  • Innovation: direct banking calls for business models are differentiated from the traditional "full-fledged" one. It focuses on a specific customer segment to offer standardized products and services to bring cost effective advantage to full play while forging core competencies by differentiating itself with traditional retail banking business. 
  • Customer-centric: direct banking must get rid of conversional top-down operation approach to put customer to center, design products based on customer needs and reengineer process to fit the product requirements, and bring customer-centric into reality.
  • Efficiency: operation and process efficiency. Direct banking model requires speedy response to customers' changing needs through an even flatter organizational structure to realize agile decision making and swift market response. Meanwhile, the process must be substantially leaned compared to traditional approach. Mobile internet is the core element to form a convenient and differentiated customer experience.
    • Successful direct banking model relies on five areas, including customer segmentation, products and services, channel, branding and support systems. To forge a direct banking winning strategy, commercial banks need to adopt a systematic approach in high-level planning and thoroughly assess availability of existing resources
(Simplified Chinese version only)
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