Chinese banks push into online retail

Warc, 5 February 2013

BEIJING: Major financial services providers like the China Construction Bank and the China Bank of Communications are moving into the ecommerce sector, as they seek to tap new revenue streams.

The China Construction Bank, the second biggest lender globally by market capitalisation, unveiled its online retail service – called buy.ccb.com – in June last year.

During its first six months, this site registered transactions worth RMB3.5bn, and had over 10,000 vendors offering products, which charges them few, if any, fees.

"We have to keep customers on our platform, otherwise the space that we occupy in the value chain and the service chain will be squeezed narrower and narrower," Pang Xiusheng, vice president of CCB, told the Financial Times.

In 2007, the bank launched AliLoan, lending to small business via the web, in partnership with online retail giant Alibaba. In 2011, when their initial agreement ended, the two companies went into competition.

"We made lots of attempts to capture some of this market, but in the end all the data about our clients and their transaction behaviour was in the hands of third parties," said Pang.

For its part, the Bank of Communications runs a similar platform, Jiaobohui, and has established a presence for its own products on Tmall, China's largest ecommerce site and a unit of Alibaba.

Zhang Changsheng general manager of the Bank of Communications internet banking department, told The Economic Observer: "If you don't provide this platform, customers will go find it somewhere else."

Other leading banks like ICBC, the Bank of China and China Minsheng Bank are also thought to be considering such schemes, reflecting major trends reshaping the sector.

"Competition is very severe now for Chinese banks, and information about clients is the key for their competitiveness," said May Yan, an analyst at Barclays. "Big banks actually have an advantage because they already have a very big database."

The Boston Consulting Group has predicted Chinese online retail sales will more than triple from 2012 to 2015, hitting $360bn in all, as the web audience expands by 200m, to 700m.

"Big banks will be constrained by the system," said Zhang Meng of Analysys International, the research firm. "They will not have the same innovation, market savviness and service standards as the privately run ecommerce platforms."

Data sourced from Financial Times, Economic Observer; additional content by Warc staff