OREANDA-NEWS. March 14, 2014. Industrial Bank (IB) announced the latest upgrade of its wealth management portal of “bank-bank platform”, and launched the internet wealth management brand – “Money Manager”. It is another important move targeting at the internet finance business after taking the lead to release the bank-bank cooperation brand “bank-bank platform” at home in 2007. Against the heated discussion of internet finance, what a strategic perspective is hidden behind the action of IB? With the question, the reporter of Hexun.com interviewed Zheng Xinlin, General Manager of the Institutional Business Department of IB.

Hexun.com: In December 2013, IB upgraded the wealth management portal of bank-bank platform, and launched the brand of “Money Manager” ceremoniously. Could you introduce the features of the new wealth management portal and the future operation model?

Zheng Xinlin: As a strategic deployment of IB to develop internet finance vigorously, it does not merely involve a different name, but stands for our strategic adjustment in the development of wealth business to upgrade the wealth management portal from a functional concept to a specialized brand “Money Manager”. Internet finance brings significant impact and change to the conventional financial system, and the commercial operation model of IB’s bank-bank platform and original wealth management portal contains the gene of internet finance. To release “Money Manager” at this time is to define and reinforce this model. This is a start for us to change our thinking mode of business operation and management and an opportunity for the transformation of our overall business strategy.

In terms of business characteristics, the conventional banking system centers on risk control and quality assurance, but internet finance focuses on customer experience. As great differences exist between the two in concept, logic and culture, it is easy to become non-acclimatized if we develop internet finance in the original banking system. Based on our situation, the bank-bank platform established 8 years ago is a major innovation in internal system and it operates in a way similar to a WeChat group – we only play a role of initiating, organizing, coordinating and safeguarding. In fact, the platform is jointly constructed by all partners. Nonetheless, the bank-bank platform still operates under the general background of the entire banking system, which restricts the further development of the wealth management portal in terms of system to some extent. In addition, the customer experience of partners also needs to be improved. Therefore, we plan to separate some businesses from the bank-bank platform and operate “Money Manager”, formerly known as the wealth management portal of bank-bank platform, with an independent domain name, thus really manifesting the concept of “sharing resources and achieving win-win results on a common platform constructed jointly” that we proposed upon the initiation of bank-bank platform.

Hexun.com: The upsurge of internet finance began to well up at the beginning of this year. It seems that all banks are still in the process of exploration without specific directions, and it is not smooth in the course of evolution. Can Industrial Bank develop a different path in the area of internet finance?

Zheng Xinlin: We are full of confidence in this aspect. The concept of internet finance did come into being upon the establishment of bank-bank platform, but its own design idea and operation model has verged on the former very much. Now, we should also take into consideration the following questions in developing internet finance: Where is the strong point of IB? What foundations do we have?

Based on the nature of behaviors, the whole financing industry can be divided into consumption finance and investment finance. Consumption finance is very mature, and China’s internet consumption has taken a leading position across the world. In the aspect of investment finance, however, we haven't started practically owing to the strict financial regulation and high criteria of admittance in China. As an all-round commercial bank, IB has many licenses, and thus has the capability to create investment tools. Therefore, we believe that investment finance should be a direction for the transformation of conventional banks and a breakthrough point to enter the area of internet finance. Now, a number of commercial banks are transforming toward consumption finance and carrying out direct competition with powerful companies in the area of consumption finance. Nevertheless, IB chooses to avoid the cutting edge, an orientation positioned on the basis of our consideration for a long time. The strong point of IB does not lie in the area of consumption finance, but in the links of design, circulation and quality control of financial products. In the current stage, what we should do is to improve such links employing the idea and operation method of internet finance.

It should be mentioned that internet brings a new low-cost production method which is highly extendable. A conventional physical service outlet may reach as far as 3.5 or 5 kilometers. In this scope, conventional finance has its advantages, but beyond the scope, internet finance will have more obvious advantages. As a result, physical outlets should be combined with internet in developing internet finance. With a good combination, we can seize the future commanding height. Such fusion is important and we should be impartial to both sides.

The uniqueness of “Money Manager” rests with the combination operating model of online and offline. Considering the individualized characteristics of investment financial products, besides attaching importance to online sale, we also vigorously promote the deployment of offline sales including sales terminals and customer experience outlets, thus improving customer experience by combining online and offline sales. Bank-bank platform per se is a good offline experience method. With years of networked cooperation, the payment and settlement network of the platform has covered nearly 30,000 payment outlets, and in the first half year, it is likely to become the largest payment network of tangible physical outlets in China. Though internet has imposed impact to many conventional industries, other industries will not disappear consequently. Upon their development to a certain extent, all industries should have a reasonable online and offline distribution, which should form a complementary relationship.

Hexun.com: Could you introduce the current development situation of bank-bank platform and wealth management portal? If the bank-bank platform develops online payment and settlement businesses, will IB apply for the license for third party payment?

Zheng Xinlin: Established in 2005, the bank-bank platform began with such businesses as personal counter pass and agent access to the modern payment system. Now, it has grown into an integrated financial service solutions covering eight main business sectors including payment and settlement, wealth management, technological management output, capital and asset-liability structure improvement, and foreign currency agency, etc. At the end of 2013, the trading volume of the platform totaled RMB 1.32 trillion.

In the aspect of payment and settlement, the business scope of bank-bank platform mainly covers counter pass, agent credit card repayment, and agent high-value and low-value access payment, etc. There is a big room for future development in the area. For instance, in the period of time beyond the handling period for high-value payment business by the People’s Bank of China, all banks have the needs of payment and settlement. A number of banks open night market outlets or community outlets, which creates the demands for inter-bank payment. As China boasts a vast territory, time difference between different regions may lead to obstacle in payment and settlement. It is hard to fulfill payment in the night in rural areas. Generally speaking, in the entire chain of payment and settlement, the bank-bank platform can make up such missed links so that all of us can enjoy the all-round services of modern finance. Furthermore, we are not satisfied with the current offline trading scale, and hope to develop online payment products independently on the bank-bank platform so as to improve the level and capacity of inter-bank connection. Thus, the “Money Manager” is highly related to the payment and settlement businesses, and customers may experience the superiority of online payment in the using process. Meanwhile, we also hope that the payment and settlement businesses of bank-bank platform can be accessed to the e-commerce platforms of other financial institutions; in this way, we can walk on many legs including bank-bank platform, payment and settlement, and “Money Manager”, and have more diversified development paths. Payment and settlement stand at the core for sale of all products, and we can do nothing in the sale of products without payment and settlement.

As far as licenses are concerned, the conventional functions of a bank are deposit, loan and remittance. Payment and settlement are the most fundamental functions for a commercial bank. Thus, we do not need to apply for an independent license now.

Hexun.com: How will “Money Manager” solve the prevailing problem of website visits?

Zheng Xinlin: The “Money Manager” comes into being based on upgrading the wealth management portal of bank-bank platform, so it has a certain customer basis itself. While all other banks are in heated discussion on internet finance, we have already started the reform of wealth management portal according to the model of centering on customer experience, spending a total of 9 months in restructuring. There had been about 300,000 registered customers before the upgrade of wealth management portal, and the figure has grown beyond 500,000 over more than one month after the launch of “Money Manager”. In terms of sales performance, we used to have a sales volume of millions of RMB each day, but now we have a sales volume of more than RMB 100 million an hour during the peak hours. The rocketing growth of visits is really surprising.

Hexun.com: Will the recent tense liquidity have any influence to the operation of bank-bank platform?

Zheng Xinlin: The tense liquidity will lead to rise of interest rate in the monetary market, which is good news for the business of wealth management. Recently, the wealth management products issued by the bank-bank platform generally witnessed high rates of return, attracting great attention. Every coin has two sides. Quite a lot of financial institutions, in particular small- and medium-sized financial institutions, adopt relatively conservative business operation mode. They don't conduct transactions in the monetary market, but seek state-owned or joint-stock banks to help them carry out capital operation. Therefore, when the market liquidity is tense, these small- and medium-sized financial institutions still have sufficient liquidity. The bank-bank platform has established good business cooperation relationship with lots of small- and medium-sized financial institutions in payment and settlement businesses, enjoying high adhesiveness among customers. Every time the liquidity becomes tense, IB could get some supplementation from small- and medium-sized financial institutions in addition to the funds recovered from sales of the wealth management portal, and counteract the tense liquidity in a desired manner. Therefore, IB has never encountered any liquidity crisis. Based on the actual experience of IB, when the market liquidity becomes tense, we will see good sales of wealth management products issued by the Industrial Bank. Not only is it helpful to promoting various businesses of the bank-bank platform, but also supplement the liquidity in turn effectively. In this perspective, IB has a tool more than other banks do in reducing liquidity risk.

In addition, the upgraded wealth management portal is not only restricted to the banking system. For instance, we are now doing research and development in connecting securities accounts with “Money Manager” to provide payment and settlement services. Our concept is to make payment and settlement boundless. No matter which bank’s customer you are and which type of account you have, you can buy wealth management product via “Money Manager” – this is also one of the most fundamental features of internet finance.

Hexun.com: How do you look at the construction of financial ecology system?

Zheng Xinlin: In fact, the bank-bank platform is an ecological system of harmonious finance, where all partners operate the links which they are good at in the chain of offering services to customers. For instance, some institutions are good at making products, others good at selling products, and others good at second-hand transactions and market making. All institutions find the links belonging to themselves and provide in-depth and refined services, and if they are associated together, they can establish a good value chain, from which they get deserved returns. This is a good model.

Hexun.com: Do some external competing products, like the Wealth Pot Plan launched by Alibaba, share high similarity with bank-bank platform?

Zheng Xinlin: The businesses of IB are highly market-oriented. We have always got resources and development opportunities from the market depending on our own accumulation and development. Thus, competition often becomes the driving power that incites our own reform. To the Wealth Pot Plan of Alibaba, we also made in-depth analysis and discussion inside the whole bank. A “cloud” concept is proposed in the plan, and this is helpful to extend the business scale. In fact, the technological output service offered by the bank-bank platform is typically a “cloud” concept, enabling cooperative customers to share the data and equipment of the platform and make improvement and adjustment via the platform. At the beginning of technological output, we only planned to extend to 20 to 30 small- and medium-sized banks for information system custody in our bank. Yet, there were nearly 30 newly-connected banks and more than 100 signed ones in 2013. Now, among the small- and medium-sized banks, rural banks in particular, nearly 20% have signed agreement with us, and this development model means a low duplication cost to us.

Of course, there are significant differences between the bank-bank platform and the Wealth Pot Plan. Focusing on banking businesses, the bank-bank platform is within the banking system and more familiar with the running rules and internal laws of banking, but the Wealth Pot Plan is good at internet access. In the future, there may be opportunities for cooperation between the two. The cooperation with internet enterprises could help the financial industry to apply internet technologies and concepts in a better way and promote its own reform and improvement.

Hexun.com: Could you tell us the planning and conception in the field of internet finance combining the “Money Manager” launched by IB innovatively?

Zheng Xinlin: Considering the current situation at home, the so-called “internet finance” can generally be divided into two types: The first one may be called “inclusive finance”, which shows distinctive internet properties – high tolerance, little business boundary and strong extensibility. The second one should actually be called “internet finance”, which is to dig into existing customers in great depth and improve service level with internet technologies. The bank-bank platform of IB belongs to the first type in model and idea.

The development planning of “Money Manager” in the coming year mainly covers the following tasks:

The first one is to further enrich the product families. In the next year, the essential development task of “Money Manager” is to improve the experience of offline customers. To be specific, it will provide a greater number of more diversified wealth management products. Besides the existing banking products, trust products, fund products, precious metal products and exchange products, it will also develop other financial product families including insurance and securities, thus covering the entire financial industry. If the objective can be fulfilled, the business model will be a unique one in the industry.

The second one is to develop liquid supporting products. The biggest problem in the sale of existing wealth management products is the lack of liquidity. After buying some products, customers must hold them till their maturity. We plan to develop some businesses related to the liquid secondary markets in the next year.

The third one is to organize a team of online brokers. With online brokers (or “online sales managers”) conduct product marketing, business handling, customer cultivation and relation maintenance on the internet, we plan to move the conventional personalized services offered over banking counter to the internet. 

The fourth one is to carry out brand construction and promotion vigorously. In particular, the new media tools including internet should be mobilized in a desired manner. Generally speaking, as a conventional bank, we are not good at conducting internet-based promotion, and conservative in marketing tactics. We should make changes in this aspect. Rather than only showing 80% of our strength to the outside in the past, we should exhibit our real strength on a factual basis, neither making exaggeration nor underestimation.