More than 20 years of economic reform and liberalization in China have filled up the coffers of its people and provide fertile ground for the development of retail banking business.  But just when domestic banks are clamouring to enter the retail banking market, the country’s Renminbi banking business is due to fully open up to foreign banks.  So, for the first time, Chinese banks are put on the same starting line to compete with foreign banks, and retail banking business becomes the main battlefield in which every bank is vying for supremacy.  For a long time, Chinese banks have been concentrating on government-related business to the neglect of retail banking, so much so that the latter has become one of their weaknesses.  In contrast, the early start advantages of foreign commercial banks in retail banking are all too apparent: because of the flexibility in their modes of operation and the variety of services they offer, they are able to cater to the varying needs of their customers by offering them a complete range of services.  Currently, for a major international bank, income from retail business generally comprises 30% to 70% of total income.

Keen though the competition might be, the transformation into a retail bank is an unavoidable experience for every bank.  This is so because deposit based retail businesses such as exchange and remittance, settlement, investment, consultancy and assessment, financial management and credit guarantee all have the common characteristics and advantages of having huge market potentials, low capital engagement, steady incomes and diversified risks.  It is in this area that challenges and opportunities co-exist, and where development and difficulties are turning up together.  At this moment, all Chinese and foreign banks are readying themselves for combat, and a fierce battle is inevitable.  To gain an understanding of how Chinese commercial banks are fighting for market shares in China's retail banking business, one only needs to examine what is happening in CCB, which is at the forefront of these market carving armies.

Consensus at the Decision–making Level

Though facing harsh competition, CCB Chairman Guo Shuqing displays his full confidence by declaring: “We have not the slightest doubt that we can develop CCB into a first-rate retail bank.”  He explains that his confidence is based on his in-depth analysis of the market, on CCB’s clear-cut strategic positioning of focussing on developing its retail business, and on the rapid growth CCB is achieving in this area.  He points out that, “Presently, as changes in the financial market and in financing structures are accelerating and as marketisation of interest rate is gaining momentum, the size of the indirect financial market will shrink in proportion and the spread between lending rates and deposit rates will narrow down.  Therefore, while maintaining an edge on its businesses, CCB should shift its focus to retail business and make it a new strategic growing point for full-fetch development.”

In fact, since the summer of 2005, a consensus has been reached within CCB—particularly at its decision-making level—on the paramount importance and strategic significance of retail business to CCB.  Instructional guidelines on the acceleration of developing personal banking business have been specifically issued, clearly stating it as a strategic business allowing CCB’s sustainable development.  In order to set the development of retail business in full gear, these guidelines exhort CCB staff throughout the Bank to raise customer service standards, give additional support to related policies, provide momentum to the construction of business channels, quicken the pace of building up professional teams and redouble efforts in product innovation and technical support.

The Road to Transformation

CCB’s strategy for developing retail business is through “Structural Reforms & Process Optimisation”.  So far, CCB is steadily implementing reforms in the management structure of its retail business. Last June, Mr. Du Yajun was appointed Director of CCB’s retail business.  Shortly after his appointment, he had embarked on enhancing the efficiency of CCB’s retail business, shortening the time to respond to market and customers, implementing CCB’s strategic decisions on retail business and strengthening the coordination between internal and external facets of the retail business.  At the same time, CCB has been planning in full throttle a complete reengineering of all its business processes, those related to retail business included.  Since 2005, 19 personal banking processes have undergone optimisation and improvement, providing much needed solutions to business process problems in grass-root branches.

The “customer focussed” business concept which has been much emphasised ever since CCB’s listing is also percolated throughout the development of its retail business.  This concept calls for offering individualised and humanised services in the attempt to raise customer satisfaction and realise the strategic vision of “offering the best services to customers”.  In recent years, a number customer service models such as “Xiangdang Work Station”, “Hongmei Financial Management Office” and “He Xiao Methodology” have flourished within CCB.  To further enhance customer service standards, last May CCB initiated an undercover inspection programme as a way to check on its retail outlets.  This consists of sending personnel from headquarters disguised as customers to inspect retail outlets, self-service banks and self-service facilities so as to gain an in-depth understanding of customer opinions and feedback on the services these outlets are offering.  Currently, almost 20,000 ATMs are operating non-stop at 14,000 or so outlets, providing CCB customers with an extensive, high quality and efficient service network.  In addition, in an effort to boost customer service standards, CCB will gradually implement throughout its outlets such measures as adjustable counter configurations, new queuing arrangements and flexible duty shifts.  In a pilot programme, these measures have proved highly effective in reducing customer waiting time: in the pilot outlets, 93% of customers needed only to spend less than 10 minutes in waiting, an improvement of 38% before these measures were introduced.

Customers as the Greatest Beneficiaries

Although most customers are unlikely to fully understand CCB’s overall strategies for its retail business, they can, however, appreciate the service enhancement brought about by product innovations and function upgrades.  Take for example the CCB Dragon Card, which has produced many “babies” in the past few years: the Dragon Business Card, the Dragon Auto Card, the Dragon Prestigious School Card etc.  Moreover, the functions of these Dragon cards are getting more and more comprehensive.  In particular services such as SMS notification of large size transactions, online credit card repayment, self-service bank repayment and bill settlement have broadened repayment channels and are much welcomed by cardholders.  Also, innovative services such as instalment payments for postal orders, consumption instalment payments and house renovation instalment payments have fully exploited the consumption credits bankcards provide and satisfy demands for credit consumption on the part of cardholders.

Another example is CCB’s “Happy Investor Wealth Management Card”, which offers a whole range of transaction functions and value-added services.  The most prominent features of this card is that it allows multi-account management, one-stop investment management, total freedom in bank transfers and cross-border consumption transactions.  With this tiny card, the holder not only can have current accounts and fixed accounts in Renminbi, US dollars, Hong Kong dollars, Japanese yen, Euro, British pound, etc., but he can also manage his secured loan accounts and other accounts with CCB.  Moreover, using this card, the holder can handle a whole range of financial management affairs such as those involving foreign currencies transactions, treasury voucher bonds, funds, bank-securities transfers, guarantee deposits, etc.  If necessary, a cardholder can make self-processed short-term secured loans using the fixed deposits or voucher bonds in his or her possession as collateral.  So far, 220,000 Wealth Management Cards, a key CCB product, have been issued.

On the other hand, after years of improvement and expansion, CCB has become a leader in the industry in that its self-service facilities can handle more than 60 types of transactions including multi-account transfers, bill payments, self-processed loans, buying and selling of funds, cardless deposits etc.  Its ATMs now have more than 120 functions and their contribution towards alleviating queuing problems in the outlets is all too evident.  Upon the promulgation of the “Circular on the Improvement of Services in Settling Personal Payments” by the People’s Bank of China, CCB was the first bank to respond by raising the daily withdrawal limit at its ATMs.  For this, it has won much acclaims from the media and the general public.

Though CCB has only worked on transforming towards retail banking for a short period of time, initial results have already been achieved.  Mr. Guo Shuqing points out that, in developing its retail business, CCB possesses strengths in terms of its outlets, customers and its brand name.  By virtue of its large number of outlets and the multitude of its customers, CCB has already become part of the lives of the public.  Furthermore, after 50 years of development, the brand name of CCB is so familiar to the public that it lends confidence to the development of its retail business.  But he stresses that, all these by themselves would not be sufficient to give a competitive edge to CCB’s retail business, so CCB must win market competition by providing services which are more humanised and meticulous and products which are more advanced and convenient.