Boon or bane: 3 biggest impacts of e-finance services on Chinese banks

Will overcompetition heat up?

According to Barclays, with the rapid development of electronic systems and technology, a new area has emerged – electronic financial services (EFS).

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We conclude that FIs in China should benefit from EFS, and near term we do not foresee it creating overcompetition amongst the FIs and e-commerce companies.

In fact, we believe EFS provides a good opportunity for FIs to explore new businesses through cooperation.

We also expect the current default of peer-to-peer (P2P) lending companies to drive the government to put more regulations in place to develop a healthy EFS market.

We expect more Chinese FIs to move quickly to establish their own electronic systems and services, to benefit from: 1) cost savings; 2) increased visibility and accessibility; and 3) better data analysis. FIs can lower their operating costs through the branchless or direct bank model.

They can also provide their services to clients in rural areas via the internet and mobile banking. Other benefits that have accrued from the adoption of EFS include the ability to widen the customer database and digitalize customer information for better risk management.