Industrial and Commercial Bank of China (ICBC) recently reported a contraction in its e-commerce business to the end of June. According to an “Important Announcement of Ronge Shopping Personal Mall,” ICBC will stop its services related to Ronge shopping mall at midnight on June 30. However, if users need to exchange points, buy precious metals and donate to charity, they can log in to ICBC mobile banking.
The business platform Rong e-gou was first launched on January 12, 2014. The personal mall brings together more than ten major categories such as digital home appliances, automobiles, financial products, clothing, shoes and hats, food and beverages, jewelry a nd gifts, transportation and tourism, hundreds of well-known brands, and nearly 10,000 best-selling products. In 2016, the annual report showed the accumulated transaction volume exceeded 1 trillion yuan (150 billion dollars), with almost 3,000 merchants and more than 225,000 registered buyers. After eight years, it has transformed into a comprehensive e-commerce platform covering B2C, B2B, and other fully functioning businesses.
Chinese authorities have required banks to divest non-banking businesses, and banks cannot establish non-financial business subsidiaries. The shutting down of Rong e-gou is seen as compliance with regulations and the bank’s strategy based on cost-effectiveness.
According to Su Xiaorui, a senior analyst in the financial industry, “The reasons behind the suspension of personal mall services by banks are various. The expected effect has not been achieved, and it has not brought much help to the bank’s performance growth. Second, the bank expects to focus more on its main business through business integration and optimization.”
Zhou Maohua, a macro-finance researcher at Everbright Bank, analyzed the failure of banking e-commerce. He said, “The competition in the e-commerce market is fierce, and banks’ cross-border e-commerce business is relatively uncompetitive in terms of consumption scenarios and customer experience, and the corresponding talent pool is insufficient, and market competition tends to be conservative. E-commerce brings data and a certain amount of intermediary business income to banks but also faces risks such as counterfeit products, consumer complaints, disputes, and market brand reputation.”
In 2012, ICBC created Sharon, the first banking e-commerce platform in China, and became a pioneer in the banking e-commerce business. Several banks successively launched their e-commerce platforms, such as ICBC “Rong e-gou,” Agricultural Bank of China “E-Business Manager,” Bank of China “BOC E-commerce,” Bank of Communications “Jiao Bo.” This promising business line, however, didn’t last for long. After several years of operation, some banks have adjusted their strategies and integrated their e-commerce platforms with their mobile banking or credit card malls. Unfortunately, only a few are still running.
Gu Weiyu, director of the Center for Financial Innovation and Risk Management at the Central University of Finance and Economics, said, “Finance and e-commerce have very different requirements for organizational capabilities and resources. Traditional finance has not yet been able to implement ‘Internet +’ well, and is still exploring and further promoting ‘financial technology.’”
Su Xiaorui added, “Looking at the development history of bank e-commerce, some bank-based e-commerce platforms have many shortcomings, such as not building an evaluation system for commodities and stores. And their technical support and innovation are far inferior to traditional e-commerce platforms. Poor experience makes it difficult for the platform to stay. As traditional financial institutions, banks are rooted in offline outlets, and they do not make enough efforts in publicity and momentum, whic h makes the brand awareness of e-commerce platforms among the masses not high. And some customers do not even know that the bank has relevant shopping platforms.”
Regarding the future development of bank-based e-commerce platforms, Su Xiaorui mentioned that it depends on the bank’s ability to coordinate capital flow, information flow, and logistics. In addition, it needs to break through the shackles of traditional banks and integrate more into Internet thinking.
Gu Weiyu, on the other hand, said it is more feasible to cooperate with the e-commerce platform than the bank’s e-commerce platform, and the two parties work together to serve customers. “If a bank wants to further establish its e-commerce platform, it can take shareholding, acquisition, etc., and at the same time, it should establish operation management and incentive mechanism suitable for e-commerce. From the perspective of the market for e-commerce development, competition is small, and the supply of business services is insufficient.”