IDC: China’s Baixin Bank——A New Model of Direct Banking Designed Around Product Innovation


Dec 15, 2015

Beijing, December 15 , 2015 ——On November 18, 2015, China CITIC Group and Baidu announced a strategic partnership agreement and the establishment of Baixin Bank, a direct banking firm. This new bank will have a registered capital of RMB2 billion, with CITIC Bank taking majority share. CITIC Bank said that this move not only marks the deepening of cooperation between the two partners and a comprehensive integration of traditional banks and internet companies, but also introduces the innovative “Finance + Internet” model to the China market.

IDC believes that independent legal entities are still the norm for global direct banking organizations. According to Frank Fang, Senior Research Associate at IDC China Industry Research and Consulting Services, “Business model innovations lay a solid foundation for Baixin Bank’s development and expansion. The largest factor determining its success lies in whether or not the bank can effectively apply these innovations to their products and services. Despite its booming development, the current model of direct banking can only provide a limited range of products. In the Internet age, customer demand for customized and personalized products and services is constantly on the rise. To remain competitive, direct banking will have to further innovate in order to meet growing customer demands.”

Ever since China Minsheng Bank introduced the first direct banking model to China in 2013, traditional commercial banks have introduced their own direct banking services, adopting a “direct online sales + banking” model of direct banking. Pushing the forefront of China’s banking industry, direct banking is becoming a new trial ground for traditional commercial banks in the Internet finance field and a new battlefield of competition among commercial banks.

Baixin Bank will be the first direct banking firm established in China as an independent legal entity, with its parent companies only offering material support but not intervening in its day to day operation. Until now, all forms of direct banking have taken the form of either an e-banking or similar department in banks. Unlike other private banks operating in China, Baixin Bank will have the advantages of both Internet-based operations and the convenience of traditional banking accounts. Baidu claims that: “The combination of DNA from the two partners allows Baixin Bank to benefit from strengths in both Internet and finance”. While cooperation between direct banking and Internet companies thus far has been restricted to establishing channels, Baixin Bank will expand its collaboration to also cover data, users, and risk control.

As the China banking industry becomes more open and westernized, power is shifting away from the traditional dominance of state-owned banks towards growth in more private institutions like city commercial banks and joint-stock commercial banks. For these commercial banks, direct banking is becoming an important avenue of business expansion. City commercial banks can capitalize on direct banking to expand their customer base in other regions, while small and medium-sized banks can make use of high-yield direct banking, high quality service, and Internet-based marketing to attract the customers of larger competitors. Baixin Bank will combine CITIC Bank’s enormous offline banking outlets and powerful financial risk control and customer operation capabilities with Baidu’s massive user resources, Internet technology, and operational experience to address the financial needs of users and provide innovative financial solutions.

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