E-payments surge as Chinese cheque out of banks
Financial technology and online payments threatening banks is no longer a distant possibility. To the nightmare of traditional banks, digital is increasingly the way to go for the Chinese.
Latest data from the People’s Bank of China show the new innovative means of electronic payments are expanded at an exponential rate, taking over the role once played by traditional bills and cheques.
Cheque usage is shrinking at an alarming year-on-year rate of 29 per cent in China. The mainland Chinese have this year written 96 million cheques worth some 5 trillion yuan. But the 5 trillion yuan is a drop in the total universe of non-cash payment business in China, which amounted to 86 trillion yuan in just the three months to the end of September. The total number of transactions during this period totalled 25 billion over the period.
For users who still rely on payments in the bills format, more are doing so electronically. Electronic bills have chalked up a 58 per cent increase year-on-year growth, totalling 36 million transactions worth 1.4 trillion yuan.
But the bulk of the growth in the China payment market is increasingly coming from e-payments which bypasses banks and their legacy paraphernalia of bills and notes. While it is often difficult to track all the myriad modes of e-payments, the ones that are routed through the banking system and can be tracked by the People’s Bank of China is now a 553 trillion yuan market. Chinese users have made 27 billion e-payments through banks only in the three months to September-end.
In this segment, the fastest growth is coming from the mobile market, which has this year grown at 254 per cent from last year.
According to global banking market intelligence company RFI, banks in the region should worry more about losing market share in the payments segment. In China, the average number of banking products customers have taken out at banks number to just 2.3.
“In the majority of cases, the first product with the main bank is a transactional account. To own the ‘main bank’ relationship, banks must engage customers and make this account their hub,” said Alan Shields, managing director of bank advisory at RFI.
“Once engaged, there is a greater than 90 per cent correlation between primary transaction account and the main-bank relationship. Once a bank is considered the main bank, it is almost always among the top three banks for subsequent product consideration,”Shields added.
Without the security of a cornerstone payment service, clients across the globe have shown they are more likely to jump ship. Banks must up their game in keeping clients digitally engaged, said Shields.
One in five Chinese bank clients RFI polled said they are looking to switch banks next year. The attrition rate is close to double the global average of 11 per cent.
Hong Kong clients surveyed clocked in just 6 per cent in comparison, while in Taiwan, it was 10 per cent; Singapore, 7 per cent; and South Korea, 5 per cent.