Financial technology has often been regarded as a disruptor and a direct competitor to banks. Now the situation has changed. In China, rather than Chinese banks finding themselves undermined by fintechs, they are leveraging fintech to develop new banking models.

Chinese-listed banks have continued to push operational reform along with the transformation of their physical branches. According to an EY report, in 2016 the number of large commercial bank branches declined for the first time, while the proportion of smart bank branches offering e-services and facilities increased.

Listed banks have continued to promote the construction of digital channels such as mobile banking, online banking, WeChat banking functions and direct banks (banks with no physical branches), while optimizing physical branches.

The client numbers and assets under management of direct banks have increased dramatically. As of the end of 2016, Bank of Shanghai and China Minsheng Bank reached eight million and five million direct banking clients, respectively. In terms of growth, Huaxia Bank ranked top, with a growth rate of 158.9% for direct banking clients in 2016.

Since 2017, a couple of commercial banks, including Citic Bank, China Merchants Bank, Huishang Bank and Bank of Jiangsu, set-up direct banking entities.

Baixin Bank, a direct banking firm jointly set-up by Citic Bank and Baidu, was successfully approved by CSRC in January. Baixin Bank was the first direct banking firm established in China as an independent legal entity.

Data from Analysys show that 93 commercial banks have already set-up direct banking mobile phone applications.

Banks are also working closely with fintech companies to upgrade their business models. To illustrate, Jinrong Yizhangtong (金融壹账通), a fintech platform under Ping’An Group, has provided direct banking solutions to around 40 banks, covering almost all the core elements of a banking function.

With technological advancements and the deepening reforms of banking operations, listed banks are likely to continue to optimize branches and streamline personnel structures.

“In the long run, the optimization of branches and restructuring of personnel by listed banks will be conducive to improving the service capabilities with reduced cost, enhancing the professional competence of the employees in the areas of risk management and internal control, bringing new financial businesses, and sustaining the banks' competitiveness,” says Jack Chan, managing partner of EY financial services in Greater China.