CCB: Seizing opportunities in China’s wealth management transition
China Construction Bank has always been a pioneer and an innovator in the field of retail finance. Today the bank strives to utilize technology to advance and tailor its service for retail investors, promoting the sustainable and long-term wealth management concept in China.
China has recently rolled out its 14th Five-Year Economic Plan which aims at improving the well-being of the nation by building up a stronger domestic consumer market and upgrading its industrial base. To achieve the goals, China is shifting towards an innovation-driven economy from one that was led by infrastructure investment and commodities export.
The nation’s capital market has its unique role to support this prioritized segment. The logic seems obvious: the modern financial system has already shown its natural competitive edge in resource allocation during the past century, hence it has the capacity to guide the money flow into sectors where the country really need for a long-term development blueprint.
The development and maturing of China’s capital market creates fundamental changes for citizens trying to manage their wealth. According to statistic compiled by PricewaterhouseCoopers, by the end of 2019, the China’s investable financial assets hit Rmb 165.6 trillion; the demand of diversifying from real estate holdings, which comprises about 70% of individual wealth in China, is growing fast across the board. As the country's second largest commercial lender by assets, China Construction Bank (CCB) said it’s ready to take the leading role to help its customers embrace new ways of wealth management—a rational and sustainable approach towards the capital market.
“Right now is very good timing for the middle class to adjust their portfolio. They can continue to grow their wealth by grabbing the opportunities as the country leaps into an innovative-led future,” says Sun Na, the General Manager of Personal Finance Department of CCB. She explains that as both central and local governments are committed to maintain the regulatory principle that "houses are for living in, not for speculation," plus that the country’s saving rate will further decline, money flow into the capital market will likely continue in the longer term.
Stepping forward in retail wealth
In China’s competitive banking industry, CCB has always been a leader in the retail sector.
In 2015, CCB’s private banking had already contributed more to the whole group’s profits than its corporate banking department; in 2017, when the global banking industry accelerated in transitioning and highlighting the shift toward retail wealth, CCB prioritize the sector strategically. The bank gradually developed its own philosophy and tactics to consolidate its edge among all the competitors and secured the pioneering position in this fast-changing market.
In June 2019, CCB Wealth Management became the first established wealth management subsidiary of a commercial bank in China. The founding of CCB Wealth Management further improves the bank’s active management capability and expertise in the wealth management and asset management business. By the end of the third quarter this year, total assets of CCB reached Rmb 343.2 billion, while net profit reached Rmb 263 million. Under the new asset management regulations, by the end of 2023, CCB Wealth Management will take over all the retail wealth management business from the parent bank as a separate and specialized entity.
The pioneering role of CCB Wealth Management attests to the banking group’s long-standing advantages in retail wealth. During the first half of 2020, the revenue of personal banking of CCB was up by 17.36% year on year. The proportion of profits contributed by the bank’s personal banking sector is the largest not only among the country’s state-owned banks, but also among all publicly listed banks in China.
Reshaping the value proposition
Adhering to the “market-oriented, customer-centric” business concept, CCB is committed to developing itself into a world-class banking group with top value creation capability. The Bank strives to achieve the balance between short-term and long-term benefits, and between business goals and social responsibilities.
“New Finance” is a principle that CCB came up to define and shape the bank’s future in line with the industry’s changing dynamics and the top authority’ call. It put emphasis on three key elements: technology, inclusiveness and shareability.
“New Finance acts more like an epistemology to guide the bank’s whole 300,000 emlopyees, to help them offer more tailored services for our hundreds of millions of clients,” Sun explains.
Tailored and targeted service is another very emphasized front that the bank determines to outpace than others. Just like Sun introduces, the core of “New Finance” is all about benefiting clients, to make clients feel warmly cared and well-served. The Bank made solid efforts, like promoting the development of personal online banking with digitalized marketing and customer base-specific strategy, enriched investment and wealth management products and provided services such as asset planning and asset allocation. By the end of 2019, the number of personal online banking users rose to 341 million, an increase of 35.94 million or 11.78% over 2018, and the number of transactions was 31,165 million, amounting to Rmb 31.09 trillion.
A recent marketing campaign the bank conducted is themed with “Wealth Management Season”, which aims to promote the bank’s wealth investment products to more customers. The Bank uses advanced technology in artificial intelligence and data and analytics to improve services. Starting from October, the campaign has attracted 3.57 million new clients to invest in retail wealth products.
The campaign is not only about sales, it’s also about investor education, to convey the right values to customers. “We want our clients to keep these words as a motto: wealth management is a life-long matter. Any investment decision they made should be prudential, rational and aiming for long-term profit. So we will not irrationally recommend some hot, high-yield products to all of them, it’s all about what suits them most,” Sun further elaborates.
Since the campaign was launched in October, its web page views reached over 150 million, and 3.12 million users interacted with the bank’s client managers to get more knowledge about financial products and wealth management.
The new normal: enhancing digital capabilities
If it still seemed more like icing on the cake before the COVID-19 pandemic, today digitalization is definitely the “new normal” for most financial institutions.
The challenge posed by digitalization pressures every traditional bank to change. A 2019 annual report from Boston Consulting Group found that among people 25 or younger in China, there are three times more users for WeChat than credit card customers for the five top banks combined.
The global banking industry share the similar pain when they found out that consumers’ banking preferences are rapidly evolving. According to a latest survey compiled by McKinsey & Company, in Italy, Spain, and the US, 15 to 20 percent of customers surveyed expect to increase their use of digital channels in the post-pandemic time; in other markets that percentage ranged from 5 to 13 percent. Notably, preference for handling everyday transactions digitally is as high as about 60 to 85 percent across Western European markets, even for customers 65 years of age or older.
Adhering to the development concepts of “digital, platform, ecosystem and empowerment”, CCB actually accelerated empowerment by FinTech through the years. The bank proactively built service platforms such as the “5G+ Intelligent Banking” concept that utilize artificial intelligence, block-chain and the Internet of Things to improve services and customer experience.
Enhancing risk management and consumer protection
China's Civil Code, which will take effect on Jan 1, highlighted the importance of improving people’s well-being to an unprecedented level, which poses new requirements for finance industry to put more emphasis on consumer rights protection. CCB set up new committee for consumer rights protection under the Board of and Directors, and come up with specific rules and trainings. For example, during the “Wealth Management Season” marketing campaign, Sun introduced that around 14,000 branches of the bank have participated the financial knowledge promotion and attracted more than 280 million customers to participate.
CCB has always regarded risk management as its lifeline. The bank has built a comprehensive, proactive and smart risk management system through the entire process of retail banking and wealth management to protect its customers from fraudulent activities. The bank also has set up a strict product access mechanism which evaluates and selects investment products on the market on a risk-adjusted basis. In this way the bank only works with the most reliable external asset managers to serve its customers.
Looking forward, Sun regards the future wealth management market as a highly-competitive battlefield while with unpredictable potential to unleash. “Retail wealth management is no longer something premier that only serves for high net worth individuals, and people with diversified kinds of capacity to invest will join the areas. Their choices will also be advanced, shifting from just selecting products to build more balanced portfolios. And the field has attracted an increasing number of competitors, including more and more global wealth managers are deploying their strategy in the mainland China market. But we are ready to face up all kinds of challenges.”