In the early 1980s, people in China had a one-stop shop for all their banking needs: the People’s Bank of China.
It was, in fact, the only bank in China at the time, as well as the central bank. During the early years of economic reform in the country, citizens, government-owned enterprises and the first green shoots of private business had little choice about who to bank with. Marketing and branding for the state monopoly was virtually nonexistent.
More than three decades later, branding for banks in China has taken on new urgency.
The banking sector has opened up, adding thousands of new institutions. Choice has proliferated for consumers. Speed, efficiency and convenience in financial services has fashioned new household names, mainly for the internet companies that have experimented in finance.
Meanwhile, the brands of powerful state banks are in an early stage of decline.
“Beyond the bank’s traditional image, another important thing is convenience,” says Yang Cao, chief operating officer at Yirendai, one of China’s largest peer-to-peer lenders and one of the institutions competing head on with banks. “Younger consumers value convenience a lot. They will look at how convenient your mobile app looks and they pick the bank because of that.”
The 2017 BrandZ Top 100 Most Valuable Global Brands ranking shows China’s top four state-owned banks losing ground in 2017. Bank of China, the oldest and most international of the four, tumbled 23 rankings to 94th, while Agricultural Bank of China fell 10 places to 72nd.
China Construction Bank fared slightly better, losing eight positions to 54. Industrial and Commercial Bank of China, one of the world’s largest banks by market capitalisation, fell one place to 28th, retaining its position over global competitors such as Citi, JPMorgan and ANZ. The four Chinese banks did not respond to requests to comment on the fall in ranking.
By comparison, Tencent, an internet group that launched one of China’s first privately owned banks in 2014, is ranked eighth in global brand recognition, climbing three places in 2017 and trumping the likes of IBM. Alibaba, an ecommerce company that now runs the world’s largest money market fund, rose four places to 14th.
Banks are late to the branding game because they have focused mainly on servicing state-owned companies, experts say, often ignoring the rapidly building wealth of Chinese people around them. In sharp contrast, companies such as Tencent and Alibaba founded their businesses on directly serving customers over the internet and have been much more in touch with the financial needs of ordinary people.
Alibaba, for example, founded Alipay, an online payment service, in 2004. State companies such as China UnionPay followed that lead more than a decade later in December 2015. Alibaba’s Yu’e Bao became the world’s largest money market fund in March when its assets under management hit $165bn, a testament to how non-financial companies have enjoyed the same trust as banks.
“China’s financial services [sector] in the past was focused on services for corporations. But over the past 30 years, the personal wealth of ordinary Chinese people and retail financial services have increased dramatically,” says Richard Sheng, brand director for Ping An Group. He reels off a number of services that banks and insurance companies have deployed over the past decade with the hope of catching the eye of consumers, such as credit cards and new types of insurance products.
“This is all part of the effort to serve more and more consumers . . . It shows how the brand of the business has become more and more important,” Mr Sheng added.
Ping An Insurance ranks 61st, making it the world’s top insurance brand due to its modest increase in size over the past year, its enormous network of agents and its extensive product offering. As a large financial service provider, with banking and asset management units, it has invested heavily in technology and now runs Lufax, China’s largest online wealth management group, with Rmb438bn in assets under management from retail customers at the end of 2016.
Peer-to Peer (P2P) lending, where retail investors are connected with borrowers via an online platform, has also started to make off with a significant chunk of capital from the formal banking system. The loan balance for P2P lending in May hit Rmb996bn ($146bn), up from only Rmb184bn two years earlier, according to industry consultant WDZJ.com.
Banks have not taken these losses to their capital base lying down, says Richard Cao, an analyst at Chinese securities house Guotai Junan in Shenzhen
“In order to face up to the competition, they have been launching all sorts of new operations, like their own P2P businesses,” he says. ICBC, for example, has started its own P2P platform and has an online shopping network that has mimicked Alibaba’s service. It claimed in its 2016 annual report that 250m people use its mobile application.
The state banks could be losing some ground to internet finance rivals, Mr Cao says, but they still have much greater visibility compared with most other companies because of their vast branch networks. Agricultural Bank of China alone, for example, had 23,682 branches across the country by the end of last year, making it one of the most visible banks in the world.
In some respects, branding for the state banks may not have changed much from the early days of reform. The government-controlled lenders are still focused on corporate business, with corporate deposits still outweighing those from retail depositors.
“The branding is important for the retail business,” said Jonathan Koh, an analyst at UOB Kay Hian, a Singaporean broker. “But corporate banking, this is still a relationship-based business. Branding will not change it much.”
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