China's Leaders in Fintech 2017
Forget the impression that China’s banks are out-dated and too traditional – they are rapidly embracing the importance of technology and often partnering with the country’s disruptors to modernize their products, services and business performance. Here are the leaders in Chinese fintech.
Best state-owned bank:
Best national commercial bank:
Best regional commercial bank:
Best internet company:
Best IT infrastructure partner – cloud services:
Best IT infrastructure partner – IT systems:
Best risk management partner:
Best state-owned bank
Agricultural Bank of China
Agricultural Bank of China has demonstrated great enthusiasm and determination in embracing fintech to transform its traditional banking operations.
ABC is the first Chinese bank to apply face recognition in customer services and has led its peers in deploying big-data analytics and blockchain technology to upgrade services for customers in the country’s vast rural areas.
In 2013, ABC started using face recognition to verify the identities of customers at its outlets. The technology allows the bank to complete the verification in less than half a second and has now been extended to the bank’s ATMs.
ABC is also one of the first big Chinese banks to employ fintech to build an integrated underlying IT infrastructure for its diverse and often sprawling operations.
It started developing its IAAS (infrastructure as a service) cloud platform as early as in 2012. Over the years, the bank has also applied big-data analytics to successfully centralize and speed up data processing and analysis for its businesses in and outside China.
In rural China, ABC is a recognized leader in offering intelligent services through the internet and mobile phone applications to meet the needs of farmers and to support the robust growth of e-commerce in agricultural areas.
In July 2017, the bank launched an innovative online supply-chain financing system for e-commerce in agricultural products. The system, which was developed with blockchain technology, has effectively solved the problem of credit-status assessment for farmers. It will further strengthen the bank’s position as the leading financial service provider in rural China.
Among big Chinese banks, ABC has also stood out for the collaborative approach it has taken when using fintech to drive the transformation of its traditional businesses.
The bank formed partnerships with two domestic tech giants during last year. In May, it teamed up with Huawei Technologies to develop the underlying infrastructure for a next-generation cloud-computing platform. In June, it signed an agreement with Baidu on building a joint fintech lab that is mandated to develop innovative products in areas including customer profiling, precision marketing, risk control, customer credit assessment, intelligent customer services and intelligent investment advisory services.
Best national commercial bank
China Merchants Bank
China Merchants Bank, a recognized leader among Chinese banks in embracing fintech, has achieved remarkable success in driving business growth through technology upgrades and product innovation.
By investing heavily in technology and talents, the bank is making solid progress in realizing its proclaimed goal of transforming itself into a fintech bank.
In recent years, CMB has continued to lead domestic banks in applying the latest fintech to a broad range of its operations.
The bank’s retail and wealth management units use technologies including biometric identification (finger print, voice and face recognition) as well as robot advisory, robot risk control and augmented reality.
The bank has also applied big-data analytics in cash management, corporate banking and financial advisory services. It has started adopting artificial intelligence technologies such as natural language processing, machine learning and voice and optical character recognition in a wide range of businesses and internal management functions such as risk control, compliance and financial management.
In blockchain technology, CMB has launched a platform for cross-border payments. It has also started applying the technology to other businesses, such as asset securitization.
To accelerate its application of fintech, CMB has rapidly increased its investment in information technology. In 2016 alone, that investment exceeded Rmb5 billion ($755 million). As of 2017, CMB says that every year it will set aside a sum equivalent to 1% of its pre-tax profits in the preceding year to incubate internal fintech development projects.
The bank will also step up its effort in recruiting IT talent – its target is to double the number of its employees conducting data-related research and development activities to 1,000 by the end of 2017.
The huge investment CMB has made in fintech is paying off. By the end of September 2017, its number of retail banking customers topped 100 million, up 10% from the start of the year. And for the first nine months of 2017, its net profit rose 12.8% from the year before, to Rmb58.8 billion. Earlier in 2017, the bank surpassed Bank of Communications, a state-controlled bank, to rank as the fifth most-profitable domestic bank.
Best regional commercial bank
Baoshang Bank was incorporated in 1998 in Baotou city of North China’s sparsely populated Inner Mongolia Autonomous Region. Yet, the bank has impressed its peers not only with its sustained rapid business growth, but also the leadership it has demonstrated in driving that expansion with fintech.
In less than two decades, Baoshang has become not only a big commercial bank in Inner Mongolia, but also an important urban one in China. By the end of 2016, it ranked 20th by assets among China’s 134 urban commercial banks, according to the China Banking Association.
Over the years, Baoshang has expanded its business network far beyond Inner Mongolia by opening branches in big cities such as Beijing, Shenzhen and Chengdu, and it is transforming itself into an internet bank, to upgrade its services and underpin business growth.
In 2014, Baoshang began this transformation by establishing a separate division for digital banking. Drawing on the experiences of global banks in running direct banks and digital banks in western countries, it created a digital banking unit under its proprietary brand Youyang Finance in August 2015.
The new unit has been able to respond quickly to customer needs and achieved explosive business growth with the support of a full team that manages product development, information technology, risk control and marketing as well as its own big-data platform.
To date, Youyang Finance has more than one million registered customers, while the value of its assets has topped Rmb7 billion ($1.1 billion).
Baoshang has made rapid progress in digitizing its operations by adopting big-data analytics and cloud computing. The bank conducts more than 90% of its business through electronic channels.
The bank has set up three data-processing centres in Baotou, Beijing and Shanghai to ensure the stable operation of its digital banking across the nation.
Baoshang’s success in deploying fintech to drive its transformation has been held in high regard not only by its peers, but also by the People’s Bank of China, the central bank. It has been recognized by the PBoC as a national leader in adopting fintech for the last two consecutive years.
Best internet company
Baidu Financial Service Group
Baidu is by far the largest internet search engine in China and a pioneer in introducing artificial intelligence to a wide array of industries in the country.
In 2015, Baidu combined its many financial services-related units into one big group, the Baidu Financial Service Group.
Thanks to Baidu’s technology strength, the group has since accelerated development of fintech products and formed productive partnerships between technology companies and domestic banks in China.
By consolidating capabilities that were spread across different units, the group has set itself the task of helping financial institutions deploy fintech to optimize interfaces with customers and restructure the value chain of services, reconstruct risk management systems, redefine service boundaries and upgrade the underlying IT infrastructure.
To do that, the group has rolled out a series of innovative fintech products to allow banks and other financial service providers to leverage its technology competence in seven areas: intelligent customer acquisition, identity recognition, big data-enabled risk control, intelligent investment advisory, intelligent customer services, financial cloud and blockchain technology.
Leveraging Baidu’s technology strength in bid-data analysis and artificial intelligence, these products have proved to be highly effective in use. Take the chatbot the group has developed. The robot can help a financial institution handle up to 97% of customer inquiries online and solve more than 90% of the problems raised by customers.
In 2015, Baidu set up a joint-venture direct bank with Citic Bank, a national commercial bank. In October 2017, it completed the establishment of a joint lab with Agricultural Bank of China, a state-owned commercial bank, to develop innovative fintech products for customer profiling, precision marketing, customer status assessment, intelligent investment advisory and intelligent customer services. The first batch of products the lab has developed is due to come online before the end of the year.
Best IT infrastructure partner – cloud services
Alibaba Cloud, a unit of China’s Alibaba Group, started offering cloud services for domestic financial institutions in 2013. A pioneer in Chinese cloud services provision, it has fortified its position as a clear leader in servicing banks and other financial institutions.
Alibaba Cloud stands out not only for the large customer base it has built and the reliability of its services, but also for its leadership in assisting domestic financial banks to embrace fintech.
Alibaba Cloud has attracted by far the largest number of domestic financial institutions as customers for its cloud services. Currently, nearly 100 Chinese banks, including national commercial banks and most regional banks, use its services. In addition, more than 70% of securities firms and about two thirds of insurance companies are also clients.
For domestic banks, Alibaba Cloud offers a broad range of services to suit their needs. It has developed customized cloud platforms for large and medium-sized banks.
For smaller banks such as urban and rural commercial banks, it creates a shared cloud platform for those with similar needs so that they can access its cloud computing and big-data services in a cost-effective way.
Leveraging the technology strength and rich experience Alibaba has accumulated in providing cloud services to support the rapid growth of e-commerce in China, Alibaba Cloud has become the supplier of choice for the maturity of its technology and reliability of its services.
To ensure stable operations and its capability to provide on-demand services, Alibaba Cloud has established five data centres in China for its customers in banking and other financial service-related industries.
In April 2017, it formed a partnership with more than 20 large domestic banks to create ‘Finmall’, or fintech mall to make its cloud services easily accessible to the entire banking sector in China.
Best IT infrastructure partner – IT systems
Hundsun Technologies is a clear leader among Chinese companies in providing IT systems for financial institutions. It has also stood out in embracing fintech to upgrade its products.
Established in Hangzhou in 1995 and listed in Shanghai in 2003, Hundsun is one of the first Chinese companies to roll out IT systems to support the entrusted and proprietary asset management businesses of a wide array of domestic financial institutions, including banks, securities firms and future brokerages.
Through continuous technology upgrades and product innovation, the company has solidified its position as a leading provider of IT systems and related software for financial institutions.
Currently, 17 of the top 20 Chinese banks ranked by assets under management use Hundsun’s IT system to manage assets, which also distributes nearly 90% of mutual funds sold in China.
The company is also by far the largest IT system provider for asset management units of securities firms and futures brokerages in China.
Hundsun has also led its peers in deploying big-data analytics and artificial intelligence to empower its IT system. As a result, that system is now used by 80% of Chinese banks for wealth management.
Hundsun’s unrivalled position as a big IT infrastructure partner for domestic financial institutions was achieved on the back of its relentless investment in technology.
Among the company’s more than 7,000 employees, 80% are engaged in research and development activities. In 2016, it opened a centre to step up its research into cloud computing, big data, artificial intelligence, financial engineering and blockchain technologies to accelerate product innovation.
In the first half of 2017, Hundsun invested Rmb508 million ($77 million) in R&D, equivalent to 47% of its revenue in the period.
In June, it launched four products that apply artificial intelligence to upgrade information gathering, investment advisory, investment management and customer-relations management for its clients. Its first batch of products developed with blockchain technology will arrive on the market soon.
Best risk management partner
Tongdun Technology is a new company, incorporated in 2013. But the company has since achieved robust growth and become a recognized leader in China in deploying fintech to provide risk management and anti-fraud services to financial institutions and customers in many other industries.
Tongdun has served more than 7,000 customers since its inception, in sectors including banking, insurance, asset management, payments, online gaming, social community websites and online video streaming.
Headquartered in Hangzhou, the company has set up branches in big cities across China, including Beijing, Shanghai, Shenzhen, Guangzhou, Chengdu, Xi'an and Chongqing.
It now has more than 650 employees, of whom at least 70% are specialists and veteran engineers in big data, risk management, anti-fraud, artificial intelligence and other related technologies.
What drives Tongdun’s rapid business growth is the leadership it has demonstrated in employing big-data analytics and artificial intelligence to empower its risk management and anti-fraud services.
China today still lacks a comprehensive credit registry system. In a country with a population of more than 1.3 billion, the current system can only track the credit status of about 100 million people. Meanwhile, fraud in various forms has been widespread on the internet.
To help customers fend off potential risks, Tongdun’s integrated intelligent risk management system can serve more than 100 million API (Application Programming Interface) calls made by its customers daily. The system enables customers to monitor as many as three billion terminals and stay alert to more than one million internet fraud suspects.
Tongdun’s robust business growth and technology strength has attracted investors in China and abroad. It has raised roughly $200 million over five rounds of financing from a slew of domestic firms as well as international investment companies such as Temasek Holdings.
Tongdun recently acquired a blockchain technology firm in Toronto, Canada. With strong financial backing from investors, the Chinese company is well placed to sustain its product innovation and business growth in China and to explore the international market for its services.