FINANCIAL REPORT: New face of China's banks

In the not too distant past, Chinese mainland banks operated in a comfortable environment with little competition, unlimited customer demand, and little need for branding. Their main purpose was to provide a safe haven for clients to keep spare cash and to bankroll the government’s infrastructure projects by keeping state-owned enterprises afloat. But times are changing.

Foreign banks facing regulatory and operating challenges in their own markets are eyeing China, with its lively economy and millions of citizens with savings, as a likely rich vein of business.

Meanwhile at home, China’s rapidly expanding middle class and burgeoning high net worth individuals have growing expectations about the services they expect and currently receive.

Mainland banks have realised the need to create brand awareness if they intend to move forward, and their efforts have already brought about some notable successes.

China’s big four banks — Industrial & Commercial Bank of China (ICBC), China Construction Bank, Bank of China and Agricultural Bank of China — come in the Top 10 most valuable Chinese brands in the latest report by Millward Brown’s BrandZ Top 50 Most valuable Chinese brands. Meanwhile, the latest Hurun report rankings, which tracks China’s movers and shakers and business activities, also named ICBC as the most valuable brand in China, worth US$43.6 billion, toppling China Mobile, which had held the top slot for the past five years. At the same time, Bank of China and Everbright Bank have started to invest in marketing at home and abroad.

While they still have some way to go to compete with the branding efforts of foreign banks, Chinese banks nevertheless compare well with domestic consumer categories such as electronics, fashion, and FMCG. Umang Pabaru, managing director commercial excellence and business development, Nielsen Greater China says an indication of the attention mainland banks are paying to branding can be measured by senior executives attending branding meetings with PR firms and branding agencies. “Increasingly I see senior executives taking an interest in brand equity by asking the right questions and looking at different angles,” says Pabaru.

China Merchant Bank (CMB) is leading the way, winning positive press by focusing on customer service and customer experience. CMB was one of the first mainland banks to offer integrated services. “Maybe because CMB is a joint shareholder bank or has monitored branding activities in Hong Kong, they have been fairly swift in implementing branding initiatives, which have brought them customer acclaim,” adds Pabaru.  

In general, branding initiatives by mainland banks have revolved around offering online services, dedicated telephone banking and fast-track in-branch services to VIP account holders. Building on these relationships now could be beneficial for the future when these banks are able to offer a broader range of financial services and competitive interest rates. Regional banks including Guangdong Development Bank, Shenzhen Development Bank and China Minsheng Bank have already started implementing basic branding strategies built around customer service. However, experts agree that such banks are still at an early stage when it comes to branding.

“The majority of them, including ICBC and BOC are still thinking of the traditional methodologies to grab money from their consumers,” says business and brand strategist, Martin Roll. He adds, “Foreign banks are still seen as premium and more advanced, but limited by their scope.”
Despite foreign banks having stronger branding power, they are limited by their restricted service network, and can only tap into a small portion of the high-end market. This is where the opportunities lie for the local banks, especially if they are willing to spend more, gain traction and position themselves ahead of the other big foreign banks. And there is clear evidence that they are indeed trying to do this.

Some banks have increased the number of product brands created to meet different customer segments, some have turned to more traditional forms of advertising, while others have chosen to involve professional agencies including PR.

“Local Chinese banks are stepping up, and they are realising that marketing and branding will become important parameters to compete in the future,” says Roll.

A number of banks have started to adopt a segmented approach to marketing their services, offering premium customers VIP privileges such as personal consulting, private rooms and notifying services. Others have gone so far as to design products that, for example, target women with value-added offers and promotions such as cosmetics and shopping benefits. Chinese banks are also active in recruiting customers to their credit cards through aggressive promotions such as points rewards and cash-back facilities.

The reason for this sudden surge in marketing initiatives can be explained by many factors. The most obvious is that the industry is diversifying because of regulatory changes after China joined the WTO. But further to that, state-owned banks are facing increasing competition from a new generation of ‘joint-stock’ banks, which are aggressive, innovative and agile.

“At the same time, they are also feeling the aggression from international banking corporations that came in with marketing know-how and global reach,” explains Kaiyu Li, national planning director, Y&R.

Younger consumers who are members of a rising middle class are also more demanding in terms of service and expertise, and this is forcing banks to reposition themselves. While the old way of doing things was focused on service with a smile, new consumers want to see beyond the smile. “Traditional banking communications focusing on building the image of scale don’t speak to them,” adds Li. “The challenge is for [banks] to build differentiation by having the right products and marketing that to their consumers.”

Comparing China to other markets in the region, the biggest difference is the large gap between local, mostly state-owned banks and foreign banking brands. There is already a set segmentation of local banks — for instance, Agricultural Bank of China for the masses, particularly in lower tier cities; ICBC as China’s international bank; and BOC as its biggest domestic institution.

This has left foreign brands with the private banking and wealth management for the richest Chinese. A few banks such as HSBC, Standard Chartered and DBS, have succeeded in this task, mainly by being first-movers. These players tend to focus on certain parts of the high net worth segment by taking a very specific part of the pie. For example, HSBC claims to be ‘the world’s global bank’, while DBS boasts of Asia expertise and know-how.  

But as the market continues to grow, there will be a shift from a mindset of market development to one of conquest. “Soon we will observe not the strategy of conquering the market but targeting customers from other banks,” says Tim Schlick, co-head of strategic planning, DDB. “This is a shift in market dynamics that finds its way into changed marketing communication strategies.”

Other features in the 2011 Financial Report include:

Bank on trust

Domestic banks have more local appeal

M-Payments: the future

Insurance industry: bright prospects

New face of China's banks

Banks take a retail feel