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Merging E-Commerce and Banking
Summary:After a cooperation with Alibaba, China Construction bank has parted ways and started its own e-commerce platform. It believes that e-commerce is the trend of the future and tying it to financial services that banks provide is a natural move that benefits all parties.


By Hu Rongping (胡蓉萍), Lan Binzhen (蓝彬针), and Zhang Ke (张可)
Issue 584, Aug 27, 2012
News, cover

 Translated by Zhu Na
Original article:

After its cooperation with Alibaba in online financing ended in April of 2011, China Construction Bank (CCB) decided it wanted to build its own e-commerce platform.

On June 28, CCB launched buy.ccb.com, which combines financial services with e-commerce. CCB is the first bank in China to establish such a platform.

Pang Xiusheng (庞秀生), executive vice-president of CCB, told the EO that CCB’s entrance into e-commerce wasn’t because of its falling out with Alibaba, but because it’s the trend of the future. In China, completing 1.7 trillion yuan in transaction volume through e-commerce took a whole year in 2007, but in 2012 it only takes one quarter.

CCB’s e-commerce business includes financial services, operational management services and online shopping for businesses and individuals.

Pang said that e-commerce is not the core business of CCB, but more of a value-added service.

“The business owners on the [e-commerce] platform are our financial service targets,” Pang said. “We can learn more about them and can be responsible for consumers. Meanwhile we can also provide them with financial services.”

In terms of e-commerce service, buy.ccb.com provides business-to-business (B2B) and business-to-consumer (B2C) customer operating models, which cover wholesale, retail, real estate trading and other fields. In terms of financial service, it provides customers with things like online payment, trusteeship, guarantees and financing.

“We are also developing 4S stores [Car Sales, Service, Spare parts and Surveys centers],” said Xu Jie (徐捷), general manager of the Internet Banking Department of CCB. “The bank has an advantage in housing and car sales. In fact, buy.ccb.com has already completed successful transactions in car sales.”

Xu also said that competition among banks is becoming fiercer and fiercer. “How to develop new customers has become important for both e-commerce and banking enterprises to focus on in the future. CCB cannot lose this field,” he said. “We didn’t want to compete with 360buy and Taobao in the e-commerce field. CCB will focus more on the connection between gaining customers and the bank’s traditional services.”

Bank of Communications has also established an e-commerce platform. Zhang Changsheng (张常胜), general manager of the Internet Banking Department of Bank of Communications told the EO that there are different views within the industry regarding banks doing e-commerce. Some think banking through e-commerce is a waste of money, but with IT development, it’s impossible for enterprises not to have online business. Now more and more enterprises are doing their business exclusively online.

Zhang explained that customers’ needs are becoming more comprehensive and they want more than just simple banking services. Entering the e-commerce field is good for enhancing customer loyalty. “If you don’t provide this [e-commerce] platform, customers will go find it somewhere else,” Zhang said.  

Five years ago, the competitiveness and online transaction tracking of Alibaba attracted the interest of both CCB and Industrial Commercial Bank of China (ICBC). So they both formed high-profile cooperations with Alibaba. The banks distributed loans to small & medium enterprises (SMEs) and Alibaba provided the information about the enterprises’ operation status to banks.

Once these two institutions merged, banks could gain a list of enterprises with good credit, active transaction activity and good development prospects. Likewise, those enterprises operating on Alibaba’s e-commerce platform benefited by gaining access to financing from the banks.

A senior person working for Alibaba Financial said that “during that time, [we] had pleasant cooperation experiences with CCB, ICBC and Bank of China.”

Alibaba Financial thinks it was the different standards of judgment on SMEs’ credit that impeded their cooperation. But the banks had a different view. They said that the cooperation ended because Alibaba wanted to take a cut on the interest earned from bank loans. This was rejected by the banks because they felt it would burden customers and increase the banks’ risk.

Gradually, ICBC and CCB reduced cooperation with Alibaba.

The EO learned from interviews that the e-commerce industry thinks banks will be very worried if cooperation with them ends. Conversely, many people in the banking industry think it’s the e-commerce industry that will be more worried, since their service is incomplete. Customers want complete service, the banks believe, which is why Alibaba wanted to open banking services. But it’s much easier for banks to establish e-commerce platforms than for platforms like Alibaba to get into the banking sector.

An expert in the internet industry told the EO that the landscapes for finance and e-commerce are totally different. In the future, he believes the two fields will remain mostly separate.

Links and sources 
China International Electronic Commerce Network - E-commerce Boosts Loan Financing



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