ING and Bank of Beijing are launching a joint venture digital neobank in China. The deal is notable both for being the first commercial bank on the mainland to have a majority foreign owner and because the new brand is purely digital. This will be a standard market entry model for any foreign bank looking for a retail banking presence in Asia Pacific.
Dutch lender ING is expanding once again in Asia Pacific, after reducing its global presence in the aftermath of the global financial crisis and its subsequent bailout. This marks an important shift in strategy for ING, a milestone for the Chinese financial liberalisation program, and a key development for retail banking in China.
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By launching a digital-only bank – a “neobank” – with the Bank of Beijing, ING is testing a number of key assumptions about consumers in China. The first is that appetite exists for a new bank brand in the market, which we know to be wary of genuinely new brands.
GlobalData’s 2018 Retail Banking survey found that 84% of Chinese consumers favour a bank with a track record or an established reputation. Partnering with major local brand Bank of Beijing should help address this challenge.
The second assumption is that Chinese consumers are ready for a neobank proposition. While consumers in the country are very digital, the forefront of digital banking and payments in China has been the tech sector, notably Tencent and Alibaba. Innovation in this space has been less associated with bank brands.
However, GlobalData research suggests that two thirds of consumers in the market would be willing to switch their main bank relationship to a neobank. This is one of the highest figures in the world, and reflects a broader openness to pure digital players among younger, developing markets.
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By GlobalDataIf it is successful – and GlobalData research suggests it has every opportunity to be – then neobank joint ventures should prove to be the ideal method of market entry for foreign players in China and other large developing markets in the region. Expect many European and North American banks to follow suit, lured by Chinese projected personal lending growth of 6.7% and retail deposit expansion of 9.7% in 2019 – much higher than anything obtainable at home.
