It analyzed the annual reports last year of 37 A-share and H-share listed lenders－five large commercial banks, nine joint-stock commercial banks, 22 city commercial banks and rural commercial banks as well as the Postal Savings Bank of China.
It found that Chinese-listed banks are paying ever-increasing attention to the application of finance technology, or fintech.
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Of the 37 listed banks, 30 mentioned fintech in their 2016 annual reports.
Chinese listed banks have continued use fintech to drive the transformation of the branches and operational reforms. In 2016, the total number of branches in large commercial banks declined for the first time, it found, while the proportion of smart branches increased further.
The lenders continued to push the use of such digital tools as mobile banking, online banking and popular social media platform WeChat, while optimizing their brick-and-mortar branches. The report found that last year the extent to which digital channels substituted branch business further increased.
"Fintech such as big data, artificial intelligence and blockchain have changed and will continue to bring profound change," said Steven Xu, financial services partner at Ernst & Young.
"It will drive the transformation and upgrade of the traditional financial services industry and help financial institutions achieve innovations in products and service offerings and business models," Xu added.
The transformation of the branches was accompanied by a restructuring of staff. According to the report, over the past three years the growth in the head count of the listed banks slowed each year－particularly in the large commercial banks, whose total head count declined for the first time in 2016.
"In the long run, the optimization of branches and restructuring of personnel by listed banks will be conducive to improving their service capabilities at reduced costs," said Frank Jiang, financial services partner at Ernst & Young.
He said the process would improve the professional competence of employees in risk management and internal controls and sustaining banks' competitiveness.
The 37 listed banks reported total net profit of 1.5 trillion yuan ($218 billion) in 2016, up 3.7 percent year-on-year, compared with 2.9 percent year-on-year growth in 2015.
Looking to the future, Ernst & Young's Geoffrey Choi said 2017 was an important year for the implementation of China's 13th Five-Year Plan and a year for the continued deepening of supply-side structural reform.
"China's banking industry is still undergoing critical transformation, where both opportunities and challenges coexist," said Choi, assurance leader of EY financial services in Asia-Pacific.
"To cope with the complex and ever-changing environment, listed banks will continue to explore the path to transformation and development and fintech will inject new impetus into the shaping of future banking."
In addition to the transformation, in the process of transformation, banks should strengthen risk prevention and controls during transformation, so as to realize long-term sustainable development, Choi added.
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