China’s retail banking revenues have grown 30 percent a year since 2009 and could exceed RMB 2.6 trillion (over US$430 billion) by 2020, making the country the largest retail banking market in Asia. Intense competition for the Chinese retail banking consumer’s wallet has accompanied this fast growth. Meanwhile, the retail banking landscape has faced several challenges, including interest rate liberalization, major regulatory changes, and the rise of digital finance.
To better understand Chinese banking customers, McKinsey conducted in 2014 a personal financial services survey of more than 3,500 consumers across Tier 1, 2, 3, and 4 cities. (McKinsey has done similar personal financial services surveys since 1998, and most recently in 2007 and 2011.)
Highlights of our current research include:
- Chinese consumers are still among the least loyal in Asia. For example, less than half of Chinese consumers will remain loyal to their primary bank when offered more attractive pricing terms from competitors, compared with nearly 70 percent in emerging Asia.
- Consumer needs and behaviors are becoming increasingly similar across China. For example, penetration of several banking products now varies by less than 5 percent across tier cities.
- The country’s “Big Four” banks are less dominant. For example, their market share is eroding across tier cities and income segments.
- Digital banking is going mainstream. Today, more than 70 percent of Chinese consumers say they would open an account with a pure digital bank.
Implications for traditional retail banks and Internet players are far-reaching. For retail banks, a key to success in the future is moving toward more of a total relationship model. Internet players, for their part, must better understand how to integrate financial services with the Chinese consumer’s digital lifestyle.