Over the last decade, Ping An Bank has made a massive investment in technology research and development - digital expenditure rose by 36% last year alone. The catalyst for this was a ‘tour of observation and study’ to San Francisco in 2011 organized by Ping An Group chairman Ma Mingzhe.
Chairman of Ping An Bank, Xie Yong Lin, says this tour made a deep impression. “When we returned we brought up the idea that technology leads finance across the group,” he says. “We upgraded the technology in every business unit, rebuilding traditional financial services, and we have been growing strongly since then.”
Leveraging digital ecosystems has been a vital element in Ping An’s evolution into China’s largest non-state owned conglomerate. Creating new business models in banking has been particularly important, explains Xie.
“We are no longer competing with banks - we are competing with internet companies that have their own ecosystems and are very strong in serving customers in various scenarios,” he says. “Without the right scenarios, banks don't have upper hand. This is why we say the challenge that banks are facing is enormous.”
The banking industry is inextricably linked to the real economy, so if the economy is not performing well this directly impacts banks. Investing in digital capability enables banks to reduce risk and lower operational costs.
“When you benefit the real economy and it flourishes, then you will flourish as well,” says Xie. “So digitization is not just about creating new business models - it also means that we need to improve management, lower costs, reduce risk and improve efficiency. Therefore we will have more harmonious relationships with the real economy and our customers.”
Diversity of thought
Digital transformation inevitably creates challenges, one of the most notable being talent development. When you have a new business model you need new talent to run it.
For example, Cai Xinfa, head of retail banking at Ping An Bank had never previously worked in retail banking or even for a bank – he is a technologist and a former chief engineer at eBay.
According to Xie it is difficult for banking veterans to change their mindset. “I needed an outsider to help them change, someone who has fewer restraints,” he says. “Then we have a group of banking professionals to support that person to make sure that compliance requirements and other bottom line principles are properly addressed. When a tech person is playing the leading role, the mindset and the way of getting things done is different.”
When asked how cultural changes can be implemented in a bank, Cai refers to the importance of organizational processes.
“The old process did not really put the customer in the center,” he explains. “To change the culture we needed a precise and elaborate method. We built our internet-based products and management teams based on the services that our customers need the most, so the product team can answer customers’ needs directly.”
The product team’s key performance indicators can then be linked to the improvement of the customer experience.
For those team members who came from a traditional banking background, Cai started a book club and asked them to read about how internet companies are run so they could start to understand how these companies operate and design products and realize that they could do it too.
“In the past, we asked ourselves whether a process could be changed to benefit the customer,” he says. “Some would say we couldn’t because of regulations or compliance requirements. Now we know that there is a solution to meet both the customers’ needs and the regulatory requirements.”
Technology's continuing benefits
Ping An Bank has realized that it needs to serve customers in specific scenarios and use intelligent technologies to improve the customer experience, and also improve the operational efficiency of the whole organization.
“When we are more efficient, we will be able to share more benefits with our customers,” explains Cai. “With these two goals in mind, we believe we must co-operate with internet companies because although they have huge web traffic and many user scenarios, their financial service capabilities are still not sufficient.”
As a fully-licensed financial service group, Ping An has been working on innovation in finance, technology, and ecosystems. This means it has more strength in finance than an internet company. “In our co-operation, banks are still in a disadvantaged position,” says Cai. “We are more like a vendor of products. But we will work hard to be more competitive and become a respected partner, rather than a simple provider of products. This is the core competence that we want and we can build it through our technology development and cultural changes. This will make Ping An look very different from a traditional bank.”
On the subject of Ping An Bank’s plans for retail banking over the next three years, Cai points to the three development goals brought up by Xie Yonglin: to build a digital bank, a platform bank, and an ecosystem bank. “We’ll continue to utilize technology in the future to empower financial services, and eventually build a world-class retail bank.”