A golden age for China's private banking industry: how to enter the race for assets? - Banking blog

A Golden age for China

In line with China's economic progress over the past decades, both public and private sectors have accumulated increasing amounts of wealth. The country has the fastest rate of wealth in the world, with four new billionaires per week. Mainland China has become the second largest market for wealth management in Asia Pacific, with a huge increase in accessible banking assets.

Foreign capital is a focus area in China’s current economic development plan, and regulators have taken further steps towards reducing restrictions in the financial sector. Foreign firms are now allowed to apply for majority stakes in both securities firms and fund managers, with the optionality of full control from as early as April 2020. A variety of global financial institutions, including UBS and Credit Suisse, are converting their minority holdings in joint ventures (JVs) into majority holdings in order to strengthen their position in anticipation of the eventual full opening of the market. Other firms have announced plans to move closer to the Chinese market. Swiss-based Julius Baer Group recently announced a strategic collaboration with Bank of China whereby they will mutually cross-refer clients and also undertake various joint marketing activities. Liechtenstein-based VP Bank signed a letter of intent with Hywin Wealth Management Co. (China) with the aim of building a collaboration platform to provide wealthy Chinese investors with sophisticated wealth management solutions.

The growing numbers of affluent individuals, together with the government’s more open policy, puts China high on the agenda for CEOs in many multinational banks. However this allure of the Chinese financial market is widespread, creating an environment of fierce competition: new market participants compete not only against incumbents, mainly state-owned financial institutions, but also against both current tech giants and emerging FinTech players. Such an environment requires compelling and elaborate strategies for banks to differentiate themselves.

A Deloitte study: “Banks on the move - Establishing FinTech-enabled Private Banks and Wealth Managers in China” concluded that a strong emphasis on client centricity, a modularized operating model and an in-depth focus on the regulatory environment are essential strategic building blocks to succeed in the Chinese market.

1. A journey that puts the client at its heart

Understanding, connecting and serving customers better is one of the key differentiating factors in a fiercely competitive environment. Building the skills and applying the technologies to support sophisticated relationship management ultimately puts clients at the core of the business.

2. A FinTech eco-system evaluation and collaboration strategy

A modularized operating model enables a higher degree of agility, flexibility and speed – key factors to compete successfully in China. In a fast-paced and highly innovative market, new entrants can compete only by plugging into the local ecosystem and collaborating with a mix of best-in-class tech giants and innovative FinTechs. In this regard, the Greater Bay Area (GBA) has recently come more into focus as a potential starting location for a bank’s China operation, given its established position as innovation and tech hub as well as its large numbers of high net worth individuals.

3. A thorough assessment of the regulatory environment and an action plan

The Chinese regulatory environment is constantly evolving, forcing firms to have a regulatory strategy in place which comprises both legal entity structure considerations and license deliberations. In order to be sustainable, the measures they take must be aligned with their overall business strategy for potential future product provisioning and location.

It can be expected that China’s $45 trillion financial services industry will become even more attractive in the future, and an early and stable establishment of business is therefore important.

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Patrik Spiller - Partner, Monitor Deloitte Strategy Consulting and Wealth Management Industry Lead

Patrik leads Monitor Deloitte and the Wealth Management Industry Practice in Switzerland. He has over 17 years of experience in banking industry consulting. He supported many leading international banking institutions and wealth managers in the development of innovation and transformational strategies, technology and operational strategies as well as shaping cost reduction programmes.

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image from blogs.deloitte.ch

Patric Niffeler - Senior Manager, Monitor Deloitte Strategy Consulting

Patric is a Senior Manager within the Swiss Monitor Deloitte Strategy practice and co-author of the Deloitte study series “Banks on the Move”. In this regard, he has been leading the efforts for the most recent publication “Establishing FinTech enabled Private Banks and Wealth Managers in China”. Patric is an expert in the Private Banking and Wealth Management industry and focuses specifically on corporate and business unit strategy as well as strategic business model transformations. In recent years, he has been with Deloitte China to support the build-up and extension of the international banking practice in the region

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