大中华区零售银行咨询业务部中建立转型能力国零售银行业的新纪元2012年3月姚万里博乐阳徐军 (Jun Xu)（Jan Bellens）（Emmanuel Pitsilis）China Retail Banking Whitepaper_Chinese.indd 13/27/2012 6:34:52 PMChina Retail Banking Whitepaper_Chinese.indd 23/27/2012 6:34:52 PM大中华区零售银行咨询业务部中 国零售银行业的新纪元 建立转型能力2012年3月姚万里博乐阳（Emmanuel Pitsilis）徐军 (Jun Xu)（Jan Bellens）China Retail Banking Whitepaper_Chinese.indd 33/27/2012 6:34:52 PM China Retail Banking Whitepaper_Chinese.indd 43/27/2012 6:34:52 PM中国零售银行业的新纪元 建立转型能力增长快速但不均衡力仍待加强，盈利能中国零售银行业在过去的十年中经历了飞速的发展。从2000年到2010年，零售存款和贷款规模分别增长了4.5倍和17倍。零售客户人均持有产品数从起初的仅略高于1个增加到4个，并且仍在提高。全国各银行的零售业务团队保守估计已经超过20万人，而十年前这样的岗位还寥寥无几。十年间，零售银行的产品体系、人才团队、销售渠道和基础设施在数量和质量上都发生了质的飞跃。未来十年的前景同样激动人心。麦肯锡公司的一项最新研究表明，到2015年，中国将成为仅次于美国的全球第二大零售银行市场。预计行业总收入将从2011年的约8000亿人民币（折合约1270亿美元）增长到2020年的1.5万亿人民币（折合约2800亿美元1）（见图1）。图1然而，中国是一个多样化的市场。零售银行各细分客群、产品线和地域的增长率在过去和将来都呈现高度不均衡的态势。我们的研究发现，富裕客群未来将发挥更重要的作用（见图2）。到2020年，高净值个人客户（HWNIs）和富裕客户将占到零售银行业务收入的近50%。1 基于根据Global Insight 人民币兑美元汇率，2011年6.4，2020年5.4 China Retail Banking Whitepaper_Chinese.indd 553/27/2012 6:34:52 PM6China Retail Banking Whitepaper_Chinese.indd 6图2从产品角度来看，向财富管理和非按揭个人贷款产品的结构转变将进一步加速（见图3）。 图33/27/2012 6:34:52 PM中国零售银行业的新纪元 建立转型能力财富管理产品，包括基金和保险，以及消费金融产品，包括信用卡、无担保个人贷款和汽车贷款，将成为2010至2020年间发展最快的零售银行产品。同时，小微企业贷款也将展翅腾飞。在推动和银行追求更高贷款收益的双重动力下，银行将加大信贷供应量，以满足小微企业目前大量未被满足的金融需求。因此，到2020年，小微企业贷款余额预计将大幅增长至约3.7万亿元。虽然按揭贷款在相当长时间内将依然是零售贷款规模的中流砥柱，但由于采取多重措施遏制房地产价格过快上涨，房地产投资吸引力骤减，我们预计按揭贷款的增速将明显放缓。地域方面，中国零售银行业过去十年的增长主要是前50大城市所推动的，它们对零售存款增长的贡献率高达46%。我们预计今后十年，这些城市将继续成为主要的增长引擎，对零售存款增长的贡献率将上升至56%。但是，即使在这些城市中，业务增长的速度和来源是参差不齐的。尽管增长迅速，目前中国零售银行的盈利能力相对较低。除四大国有银行得益于其巨大的规模效益，其他大部分中国零售银行2成本收入比大多在75%以上，相较于国际上其他零售银行不到50%的平均水平高出许多。中国零售银行业利润率偏低的原因有许多，但我们认为其中两个原因较为重要：一是零售业务在过去十年处于发展早期阶段，有大量的基础性投入，二是在产品高度同质化的情况下，多数银行在零售业务上采取了 “跑马圈地”的业务模式，通过代价高昂的方式（如开立大量网点，支付高额营销费用等）获取零售客户，但同时忽略了对客户价值的深挖。2 因为各家银行的资金转移定价（FTP）做法不一，分业务线的成本分摊方式也极不透明(尤其在分行和支行层面)，许多中国银行的零售银行业务真实利润率仍然是个谜团China Retail Banking Whitepaper_Chinese.indd 773/27/2012 6:34:52 PM8China Retail Banking Whitepaper_Chinese.indd 8为什么要改变对于中国的银行而言，零售银行市场的惊人发展带来了巨大的机遇，但要捕捉这一机遇并实现盈利，绝非易事。各家银行需要制定缜密的战略，同时对既有的运营模式进行调整和转型。在零售银行利润压力日趋增大、市场日益趋于成熟，以及外部环境不断变化（包括竞争加剧、资金成本上升、新技术的涌现、监管压力以及客户行为偏好发生根本性转变等）的前提之下，不惜一切代价“跑马圈地”的传统做法将面临前所未有的艰难境地。银行将不得不更加关注零售业务本身的盈利能力过去十年中，存贷款规模的高速增长、利差逐步扩大、信用环境十分温和等因素推动了各银行利润的大幅增长，使得银行有足够的财力和物力侧重把刚刚起步的零售业务的规模做大，而不必过于强调其盈利能力。然而，鉴于行业整体利润率在未来十年将受到压力，我们预计银行今后将不得不更加注重零售银行自身的盈利情况，而不会像过去一样无条件地投入。麦肯锡预测，在利率市场化、风险成本上升等因素的共同作用下，到2020年，中国银行业的平图43/27/2012 6:34:53 PM中国零售银行业的新纪元 建立转型能力均客户资产回报3率将受到大幅压缩，从当前的2.2%下降至1.6%，零售银行的回报率也会下滑，从当前的3.3%下降至3.2%（见图4）。市场增速放缓，需要差异化的业务模式麦肯锡全球研究院预测，未来十年中国名义GDP的复合年均增长率将从过去十年的10.5%下降至7-8%，导致中国零售银行的整体增速慢于过去十年。我们预测从现在到2020年，零售银行业的风险调整后总收入规模将以11%的年复合增长率增长（比名义GDP的增速高出40-60%），而过去五年的增长率则高达24% 。零售银行业的许多细分市场正日趋饱和，未来增长不能仅仅源于新客户获取。以信用卡市场为例，在过去十年中，一二线城市市场收入几乎全部来自新客户。而在今后十年，我们估计50%以上的收入将来自对现有客户关系的深化。今后，中国的零售银行需要认真思考“在何处竞争”和“如何差异化竞争”的问题。银行需要瞄准与其自身能力相匹配的细分客群，地域和产品线，抓住高增长的业务领域和发展机会。各家零售银行的战略，产品和运营模式高度同质化的时代将会成为历史。不断变化的外部环境中国的零售银行还面临着外部市场环境的一些根本性变化，包括不断变化的客户行为、逐步高企的存款成本、日趋白热化的同业竞争、层出不穷的技术创新和逐步升级的监管压力等等。不断变化的客户行为。麦肯锡去年开展的个人金融服务调查发现，中国的零售银行客户正变得日益成熟，要求更高，而忠诚度却更低。他们持有更多数量的金融产品－ 客户人均金融产品数量从2007年的3.6个增加到2011年的4.0个；他们也更加乐意接受财务建议 - 麦肯锡中国个人金融服务调研表明，中国67%的客户接受投资建议和帮助，高于50%的亚洲平均水平。中国客户对他们的主办银行的满意度不高，相对于其他亚洲市场的客户，他们更不情愿推荐他们目前正在使用的银行，也更不愿意继续与自己的主办银行打交道。相较于84%的亚洲平均水平，只有80%的中国客户对自己的主办银行表示满意。他们之中，仅有55%的客户愿意再选择目前的主办银行作为主办银行，低于58%的亚洲平均水平和66%的亚洲发展中国家水平。最后，只有47%的客户愿意推荐他们的主办银行，远低于亚洲平均水平的60%。也正因为如此，客户宁愿货比三家，寻找价格更为优惠的金融产品。调研显示，大约70%的中国客户认为“在购买金融产品时货比三家是值得的”，高于亚洲平均3 由于中国银行资产负债表上近50%的资产是非客户资产，中国银行业的整体资产回报率显著低于客户资产回报率China Retail Banking Whitepaper_Chinese.indd 993/27/2012 6:34:53 PM10China Retail Banking Whitepaper_Chinese.indd 10水平的60%，并大大高于40-50%的亚洲成熟市场如和新加坡的富裕客户的水平。中国客户的要求也日趋提高。出于对更好的客户服务体验和更专业的金融建议的追求，客户正逐渐从传统大型国有商业银行中流失，大众富裕客户及以上的中高端客户尤为如此。比如，虽然约80%的客户仍然选择四大国有银行作为他们的主办银行，但是选择四大国有银行作为次主办银行的客户比例从2007年的75%显著下降为2011年的60%。此外，新渠道的时代也终于来临。ATM的使用渗透率从2007年的53%提高至2011年的84%，电话银行从4%提高至12%，网上银行从3%提高至18%，移动银行则从1%提高至3%。很重要的是，我们注意到，银行业务从传统支行网点向新兴渠道的转移是跨各级城市和各年龄段的普遍现象。因此，建立多渠道多客户接触点的业务模式对中国零售银行在下一代竞争中获胜至关重要。逐步高企的存款成本。我们认为，由于实际的存款利率很低甚至是负的，并且财富管理类产品的普及程度和可选范围不断加大，个人金融资产结构的 “去存款化”过程在未来10年将延续。在2005年，存款占到了中国个人金融资产的73%，如今已下降至60%，但仍然远远高于美国22%和17%的水平。鉴于75%的贷存比法定上限，尽管中国大多数银行只有不到30%的资金来自于零售存款，但毋庸置疑，对零售存款的争夺将更加白热化。事实上，市场上的“实际”存款利率已经明显上升。举例来说，过去两年，几乎无风险的结构性存款类产品的销售量激增了一倍以上，年化回报率也攀升了近200个基点。由于这些代价高昂的资金来源带来的实际收益极其有限，零售银行的利润率将受会受到持续的冲击。日趋白热化的同业竞争。除了对存款的激烈竞争，在过去几年中，各家银行对零售业务的竞争也越发激烈。一个指标是银行网点的数量保持了稳步增长的态势。尽管面临全球金融危机，仅在2009和2010年两年种，国内便开设了共7,340个新的银行网点。北京和上海的银行网点密度已经与和不相上下，例如，2010年北京和每万人拥有网点数同为1.8个，而上海和同为1.4个。层出不穷的技术创新。四大技术趋势，即实时应对客户需求、物联网、云计算和技术驱动的业务模式，正在从根本上改变客户行为和银行的运营模式。尤其是在网络技术、移动支付、基于互联网的数字营销、以及数据化风险管理等领域，技术创新正在为有远见的零售银行创造性的业务模式创造条件。逐步升级的监管压力。利率市场化将是未来十年中国银行业的大势所趋。带来的结果将是净息差的逐步收缩，并迫使银行建设更强的风险定价、营销和成本控制能力，以保持较高的利润水平。同时，监管机构也在强化对银行收费项目的管理，并采取行动提高收费透明度。这将导致交易类中间业务收入的增长慢于预期。3/27/2012 6:34:53 PM中国零售银行业的新纪元 建立转型能力总而言之，中国的零售银行市场正在进入一个新的时代，面对新的市场环境，中国的零售银行需要建立全新的业务能力。市场发展初期，零售银行依赖发现市场空白、并通过“跑马圈地”成功的获取大量新客户而取胜。而在今后的市场中，他们必须建立一系列全新的业务能力，尤其是在提升客户价值和成本控制方面。（图5）图5China Retail Banking Whitepaper_Chinese.indd 11113/27/2012 6:34:53 PM12China Retail Banking Whitepaper_Chinese.indd 12未来十年零售银行的制胜 之道未来十年中，中国零售银行业的赢家不仅需要成功地继续扩大业务规模，更要能够提高盈利能力。只有采取不同以往的模式才能在新的市场形势中获胜：中国的零售银行必须将重心从简单获取客户向提高户均利润水平转变。根据我们的经验，这需要银行开展全面的转型。 建立主办银行关系 我们的研究表明，中国所有零售银行客群均将接近70%的资产存入其主办银行。根据我们的个人金融服务调研，将银行关系从“经常使用”（主办和次主办银行） 转化为真正的主办银行关系，也是中国零售银行面临的最大瓶颈。例如，除四大国有银行外，中国各大零售银行的此项转化率均在12％和30%之间，而日本和地区的银行则分别达到54%和51%（见图6）。图6根据我们的经验，高效的交叉销售和卓越的客户体验是建立更多主办银行关系的关键途径（见图7）。 3/27/2012 6:34:54 PM中国零售银行业的新纪元 建立转型能力交叉销售，特别是高粘度交易类产品和财富管理类产品的交叉销售，是加深客户与银行关系的非常有效的方式。在中国，我们发现客户对于主办银行的选择高度取决于代发工资、代缴费、股票第三方存管和其他投资帐户等产品关系，而与信用卡和借贷类产品的相关性偏低。图7在国际上，美国第二大零售银行富国银行就将客户洞见和交叉销售作为战略核心，并建立了“伟大的八个（ Gr-eight）”的战略愿景（每名客户至少持有八种产品）。其公司价值观和使命阐述道：“我们越为客户提供他们所需的服务，我们就越了解他们；我们越了解他们的财务需求，他们就会带给我们越多的业务；他们和我们的业务来往越多，他们获得的服务价值就越大，他们就会对我们越忠诚。他们和我们来往的时间越长，我们就越有机会满足他们更多的财务需求。”正因为这样的愿景已深深植根于整个组织之内，富国银行能够相对安然无恙地度过经济危机，并成为全球估值最高的银行之一。 客户体验在建立主办银行关系中扮演另一个关键角色。中国零售银行业的客户流失率通常高达30%-40%，也就是说，每年有30－40％的客户由于管理总资产缩水而被调低到更低的资产级别。这一比率远远超过国际同业水平。麦肯锡开展的个人金融服务调查发现，在15项最重要的忠诚度动因中，有12项都是与客户体验相关的。（见图8）因此，提供一流的客户体验也是建立主办银行关系的关键。China Retail Banking Whitepaper_Chinese.indd 13133/27/2012 6:34:54 PM14China Retail Banking Whitepaper_Chinese.indd 14图8中国零售银行业的客户流失率高而客户体验是客户忠诚度的重要原因客户体验相关因素15个忠诚度相关因素中的12个与客户体验相关重要性按重要性排序的忠诚度驱动因素高1. 员工熟悉银行流程2. 分行地点对我十分方便3. 银行很少在我的账户上犯错误4. ATM机位置方便5. 员工非常礼貌、友好6. 银行尊重我的隐私7. 银行提供全系列的金融产品和服务8. 银行兑现对客户的承诺9.如果我的账户出了问题，银行可以快速解决10. 员工了解产品和服务11. 分行室内布局及指示牌清晰12. 员工随时愿意帮助我13. 银行品牌在市场中处于领先地位14. 如果银行出了问题，我认为我可以确保把我的钱拿回来低15. 员工尽量了解我的需求，确保我得到最合适的产品和服务资料来源：麦肯锡中国个人金融服务调研2011打造转型能力新的市场环境要求不同以往的业务模式。我们认为未来制胜的零售银行模式需要能够实现三大战略目标：建立更为持久和更高利润的主办银行关系；用更聪明和更有针对性的方式获取客户；以及建立低成本和规模化的运营模式。为达到这些目标，中国的零售银行必须打造卓越的能力组合，改进客户体验和运营效率，建立组织能力，并提升资本和资金运营效率。因此，结合国际经验和国内的现实，我们总结了下一个十年中国的零售银行转型的能力，能否建立和巩固它们将是未来一家零售银行成败的关键（见图9）。图9打造转型能力管理客户，提升1▪“大数据”指导更为有效的交叉销售价值2▪“定价2.0”作为一项竞争优势3▪“新风控模式”打造更有效的风险管理模式用更低的成本来改4▪“端到端流程再造”以提升客户体验和运营效率善客户服务5▪提高技术运用的能力，建立“创新型组织”优化组织和人才6▪更加垂直、专业和灵动的“大零售”组织架构体系7▪“新型人才观”，以实现持续的业绩增长管理资本和8▪“新一代的资产负债经营策略资金有效性成本”为方法，以提高贷款收益，降低资金资料来源：麦肯锡分析3/27/2012 6:34:54 PM中国零售银行业的新纪元 建立转型能力 管理客户，提升价值1. “大数据”指导更为有效的交叉销售。衡量客户关系的一个常用指标是每个银行的客户平均持有产品数。在中国，这一指标仅为1.6个，远远低于5到8个的国际最佳水平。出类拔萃的银行能够通过建立强大的数据基础和先进的数据分析能力，提升交叉销售效率，提高客户钱包份额。通过数据挖掘，银行可以对客户细分和每个客户细分的价值定位有更深刻的理解。根据这些洞见，银行能够向客户提供更具针对性、更创新和整合度更高的产品捆绑解决方案。同时，银行可以通过客户的产品持有、行为模式和人生阶段，识别出来“下一个应该销售的产品”，通过有针对性的营销活动来推动客户价值。例如，我们已经看到一家股份制银行采用这种方法，通过有效的数据挖掘和严格的落实执行，将其15%的按揭客户成功转化成大众富裕理财客户。 2. “定价2.0”作为一项竞争优势。 我们与国内几家银行客户的合作经验表明，定价在中国可以成为一个在24个月内将零售银行总收入提升10%-20%的强大的盈利杠杆。在中国，银行应该建立必备的工具和能力来定期优化价目表，持续地进行同业对标，引进折扣监督系统并开发先进的定价模型，包括客户价格弹性和分线评分来支持前线。要实现这些，定价需要成为银行内部一个明确的职能，配备与产品部门和前线对口的定价专家。管理信息系统必须能够支持定价决策，并分析任何价格改变对于业务量和盈利性影响。这包括一系列复杂度不一的管理信息工具，比较简单的例如从前线业务信息中追踪收入漏损情况以及监控一线人员如何自主决定定价，比较精细的例如优化各种产品和客户关系的定价工具。3. “新风控模式”打造更有效的风险管理模式。金融危机之后，全球银行业都在思考如何优化风险管理模式。全球的银行都认识到，将风险管理仅仅理解为产生复杂分析结果和“暗箱”模型的后勤部门是远远不够的。同样的，对中国的银行而言，建立支持业务快速发展和以盈利为导向的风险模式也是同样重要的。我们认为，未来中国银行业新风控模式有四大支柱：建立以周期和情景分析为基础的早期预警系统和压力测试；建立清晰的风险问责体系；建立迫使由业务部门而不仅仅是首席风险官来承担风险责任的治理结构；确保激励机制完全符合银行的风险管理的需求和偏好。在中国的零售银行业中，欺诈往往是比客户违约更大的风险挑战，所以更重要的是在做好风险模型之外，通过优化组织架构和激励体系来建立优良的风险文化。此外, 更好的风险认识也能够帮助银行在现有客户群中发现潜在的贷款客户,从而使得银行能够更有效地利用预批的信贷额度和产品来对这些客户进行交叉销售。用更低的成本来改善客户服务4. “端到端流程再造”以提升客户体验和运营效率。在过去几年中，尽管银监会反复要求从“部门银行”向“流程银行”转型，很少有银行能够真正破解建立“流程银行”的成功之道。所谓“端到端”，是指以客户为中心、跨职能部门的流程再造方法，能大大简化银行业务流程，大幅改善客户体验。要实现这一目标，银行需要详细描绘和重新设计客户体验流程，尤其侧重于客户的“真情时刻”，即客户对结果有大量情感投入的时刻（如当客户遗失信用卡China Retail Banking Whitepaper_Chinese.indd 15153/27/2012 6:34:54 PM16China Retail Banking Whitepaper_Chinese.indd 16时)。在亚洲，我们看到一些银行通过在六到八个关键流程上实施了系统的端到端转型而将客户满意度提升了20%（以客户将其该银行体验评为“极为出色”和“非常满意”的人数占比来定义）。中国的银行面临最典型的挑战是目前的组织结构并不支持跨职能部门的无缝合作，因此，要想成功完成这项转型，通常需要由行长亲自牵头，并建立强大的项目管理办公室来协调推进变革过程。端到端流程再造的另一个价值就是能降低成本。应用精益化原则，端到端的转型可以使单位运营成本降低20%-30%。例如，东南亚某银行通过将其70%-80%交易处理进行标准化，以及将超过50%的零售和中小企业信用审批进行自动化，从而成功地将总运营成本降低了20%。5.提高技术运用的能力，建立“创新型组织”。一方面,技术是我们这里所讲的所有转型能力得以实现的条件。离开了强大的技术，银行将无法满足客户更复杂的需求，也无法在将来与其它零售银行有效地竞争。另一方面,技术进步使得建立型的业务模式成为可能。在中国，仅仅五年之内，第三方支付公司就已经占据了中国支付交易量的约1/4。如果监管放开，它们将必定利用掌握的支付信息向客户交叉销售投资、保险和借贷产品，从而威胁到传统零售银行的核心业务。面对类似的挑战，中国的零售银行必须及早作出坚决有力的应对，而不能坐以待毙。提高银行对技术运用的能力需要银行改进技术基础设施和相关的运营流程，并建立一个真正的面向未来的“创新型组织”。一个面向未来的“创新型组织”，需要建立专门的组织机构，聘用非传统银行的专业人才（例如从互联网公司），每年从利润中拿出一定比例的创新资本。银行必须通过调整业绩指标和管理流程注入一种不同于传统银行的创新文化。优化组织和人才体系6. 更加垂直、专业和灵动的“大零售”组织架构。目前中国许多零售银行的关键瓶颈之一，是由当前块状管理组织架构带来的分支行执行力的欠缺。零售资源往往没有100％投入到零售业务中，而是出于短期盈利性或管控方面的目的，被“二次分配”给其他的部门。另外，由于各分支行行长对零售业务的理解水平和重视程度不同，新业务举措也常常难以在所有分行和支行得到有效实施。未来，我们预计成功的零售银行必将向一个更加垂直化管理、专业性更强和更为灵动的组织架构的方向发展。当然鉴于中国市场独特的复杂性，例如按地域监管的特性，中国的银行不能完全复制西方银行的事业部的做法。7. 新型人才观，以实现持续的业绩增长。成功的转型要靠人来实现。麦肯锡基于对过去十年全球两千多家公司的转型经验的研究表明，70%的企业转型是失败的，究其原因70%是人的问题。以支行网点转型为例，几乎中国所有的银行都进行过一轮或几轮的网点转型项目，然而大多数都没能产生持续的效果。主要原因在于银行试图通过自上而下地发文和运动式的方式推动变革，而没有解决根本的人的意识和能力上的差距。另外，中国的零售银行常见的误区是把能力建设和培训划等号。麦肯锡研究发现，单纯的课堂培训实际上3/27/2012 6:34:55 PM中国零售银行业的新纪元 建立转型能力是最低效的对管理人员的能力发展方式。轮岗、特别项目、有效的导师制和辅导是人才发展更为有效的方式。管理资本和资金有效性 8. “新一代的资产负债经营策略”为方法，以提高贷款收益，降低资金成本。中国以前零售银行的业务模式都是以业务增长而非净资产收益率作为优先目标的。这种做法在抢夺新客户为主的市场环境中颇有有效。但在新的环境下，资金和资本管理则显得更加重要。实现这方面的转型，首先要建立对各个客群的风险调整后的贷款收益和资本消耗，以及不同类型的存款融资成本的深刻认识，并主动选择最符合自身情况的零售银行资产负债结构。例如，我们的一家客户通过严谨的规划和实施一个新的资产负债管理战略，在两年间就实现了50个基点的净利差提升。***“以客户为中心”的转型和“建设转型能力”绝非易事，但却不可回避。那些能根据市场环境变化，打造转型能力，提升客户价值，降低运营成本的银行将成为中国零售银行业的下一代赢家。因此，有远见的中国零售银行的领袖们需要制定一套完整的转型计划，清晰勾勒出建立和培养八种转型能力的路径图。同时，需要建立一个有效的转型组织来支持变革，并在解决“硬性”业务问题的同时，有效解决转型中不可忽视的“软性”文化问题。China Retail Banking Whitepaper_Chinese.indd 17173/27/2012 6:34:55 PMChina Retail Banking Whitepaper_Chinese.indd 183/27/2012 6:34:55 PM更多信息,请联系：姚万里（Emmanuel Pitsilis）资深董事, Email: emmanuel_pitsilis@mckinsey.com博乐阳（Jan Bellens）董事, 上海Email: jan_bellens@mckinsey.com徐军 (Jun Xu)副董事, 上海Email: jun_xu@mckinsey.comChina Retail Banking Whitepaper_Chinese.indd 193/27/2012 6:34:55 PM亚洲金融机构咨询业务部2012年3月Layout by GCO NewMedia版权所有 © McKinsey & Company www.mckinseychina.comChina Retail Banking Whitepaper_Chinese.indd 203/27/2012 6:34:55 PMAsia Retail Banking PracticeNext generation retail banking in ChinaBuilding eight transformational capabilitiesMarch 2012Emmanuel PitsilisJan BellensJun XuChina Retail Banking Whitepaper_English.indd 12012/3/28 10:25:32China Retail Banking Whitepaper_English.indd 22012/3/28 10:25:32Asia Retail Banking PracticeNext generation retail banking in ChinaBuilding eight transformational capabilitiesMarch 2012Emmanuel PitsilisJan BellensJun XuChina Retail Banking Whitepaper_English.indd 32012/3/28 10:25:32 China Retail Banking Whitepaper_English.indd 42012/3/28 10:25:32Next generation retail banking in China Building eight transformational capabilitiesRapid but uneven growth, weak returnRetail banking in China has grown at breakneck speed in the last decade. During the period 2000-2010, retail deposits grew by 4.5 times and loans by a staggering 17 times. Products per customer have increased to four from just above 1. All banks combined, there are more than 200,000 employees dedicated to retail today compared with almost none 10 years ago. Retail product offerings, the talent pool, channels and infrastructure have all grown dramatically in scale and quality. More exciting days are ahead. By 2015, China will become the second-largest retail banking market in the world, after the United States. By 2020, total retail banking revenue is expected to reach USD 280 billion1 a year from USD 127 billion today, new research from McKinsey & Company shows. (Exhibit 1) Exhibit 1China will become the second largest retail banking market in the world by 2015, with annual revenue pool around USD280billion by 2020Revenue of Retail banking-post risk, top 5 countriesUSD billions2011E2015E2020EUS443US602US754Japan141China1161China1279China1127Japan156Japan174Germany83GermanyGermany107UK63UK88UK1041 China forecast based on conservative scenarioSOURCE: McKinsey Global Banking PoolsChina is a diverse market, though, and the historic and expected growth rates in retail banking are uneven across customer segments, products, and geographies. Our research finds that wealthy segments will play an even 1 Based on an exchange rate of USD to RMB of 6.4 in 2011 and 5.4 in 2020 from Global Insight.China Retail Banking Whitepaper_English.indd 552012/3/28 10:25:326China Retail Banking Whitepaper_English.indd 6Exhibit 2High Net Wealth Individuals (HNWIs) and affluent customers will contribute to almost half of retail banking revenue by 2020Post-risk retail bank revenues by segment12010-20CAGR 2010-20 RMB billions, percentPercent100% =5229141,49411HNWI15192215Affluent21252714MAF12141312Mass252423882010201520201 AuM Threshold for each segment: HNWI –throughout forecast period7 Mn RMB; Affluent –500K RMB; MAF –50K RMB; Mass –10K RMB; assume constant threshold 2 Mass include the urban and rural marketSOURCE: McKinsey market sizing models; team analysismore important role in the future than they do today. (Exhibit 2) High net worth individuals and affluent customers will represent nearly 50 percent of retail banking revenue by 2020. They will also be the fastest-growing segments.From a product perspective, wealth management products, including mutual funds and bancassurance, and consumer finance, including credit cards, personal loans, and auto loans, will be the fastest-growing product categories between 2010 and 2020 (Exhibit 3). Micro-business lending will take off, with forecast loan balances of RMB 3.7 trillion by 2020, as banks – encouraged by the government – increase credit supply to meet the needs of small and micro enterprises and try to lock in higher loan yields. Mortgages will remain the bulk of retail lending in the mid to long run, but market growth will slow as the government acts to rein in soaring property prices, making real estate a less attractive investment.The top 50 Chinese cities drove the growth of retail banking in the last decade, accounting for 46 percent of revenue increases. We anticipate that these cities will continue to be the major growth engines, contributing 56 percent of revenue growth in the next 10 years. Even within these cities, however, growth rates and sources of growth will be highly divergent.While growing at a rapid pace, retail banking in China offers relatively low returns today. With the exception of the “Big Four” banks, which benefit from massive scale, most Chinese retail banks show low profitability, with cost-to-income ratios greater than 75 percent for most of them2, compared with less than 50 percent for most of their international peers.2 Many Chinese banks still have difficulties assessing the true profitability of their retail bank-ing business because of inconsistent funds-transfer-pricing practices and non-transparent allocation of costs by business line, in particular at the branch and sub-branch level.2012/3/28 10:25:32Next generation retail banking in China Building eight transformational capabilitiesExhibit 3Wealth management, consumer finance and micro-business lending will lead retail banking revenue growth in the next 10 yearsRetail banking and micro-lending post-risk revenues by product, 2005-20CAGR 2005-10 CAGR RMB billions, percentPercent2010-20 PercentOutlooks1,49424%11%▪NIIwill remain the bulk of the revenue40Deposit16%9%▪Deposit will shrink in the long run due to margin compression and high acquisition costs914▪Mortgage will scale back but remain bulk of lending in the mid to long run4319Mortgage45%8%▪Consumer finance will grow fast 522but remain very small compared 17Other 70%16%to cards5123loans1▪Micro-lending will surge in share 7Micro-N/A25%due to increased supply to meet 17514lendingthe unmet SMEneeds711225WM201141719%15%▪Fee income as % of revenue will 12216rise significantly driven by 152investment and bancassurance 2005201020152020products1 Include credit card, unsecured personal loans and auto loans2 Include structured deposits, mutual fund, bancassurance and other fee only productsSOURCE: McKinsey market sizing models; team analysisThere are several underlying causes of low profitability in Chinese retail banking but two in particular stick out: retail banking was at its early developing stage in the past decade with significant investment in infrastructure and the “land-grab” approach that most local banks have pursued, resulting in costly customer acquisition and an homogeneous offering. . China Retail Banking Whitepaper_English.indd 772012/3/28 10:25:338China Retail Banking Whitepaper_English.indd 8The case for changeFor Chinese banks, the staggering growth of the retail banking market offers a major opportunity. To seize it profitably, banks will need a thoughtful strategy and a transformation of their current operating model. The traditional “land grab” approach will be under great pressure in the face of a strong need for improved profitability, maturing marketplaces, and a retail landscape marked by changing customer behavior, rising funding costs, intensifying competition, technological innovation, and escalating regulatory pressure.THE NEED FOR PROFITABILITYThe last decade of frenzied growth in corporate-banking loan balances, widening of interest margins, and a benign credit environment allowed banks to focus on increasing scale rather than profitability in retail. Given the anticipated pressure on the overall return on assets3 of Chinese banks, they will put more emphasis on profitability of their growing retail franchise. McKinsey forecasts a significant compression of structural return on customer assets for Chinese banks overall, from 2.2 percent to 1.6 percent by 2020, because of interest-rate deregulation and increasing risk costs. Retail banking returns will also slip, from 3.3 percent to 3.2 percent by 2020. (Exhibit 4)Exhibit 4Overall profitability of Chinese banks will be under pressure ESTIMATESleading to stronger need for retail banking to improve bottom lineReturn on customer assetsPercent of assetsOverall bankingRetail banking2010202020102020Risk adjusted NII2.11.52.32.0Deposit NII1.40.93.82.7Fee Income0.50.71.31.6Operating expenses1.71..13.0Risk-adjusted Return on Customer Assets2.21.63.33.2Cost to income ratio43%41%65%60%SOURCE: McKinsey analysis3 The overall return on assets of Chinese banks is considerably lower than the return on customer assets because nearly 50 percent of assets on Chinese balance sheets are not customer-related.2012/3/28 10:25:33Next generation retail banking in China Building eight transformational capabilitiesMATURING MARKETPLACESThe growth of the Chinese retail banking market will be slower compared with the past decade, as GDP growth is expected to fall to a compound annual rate of 7 to 8 percent in the next decade from the compound annual rate of 10.5 percent in the past ten years, according to the latest McKinsey Global Institute estimates. We forecast that the post-risk retail banking revenue pool will rise 11 percent annually in the next decade (or 40 to 60 percent above GDP growth), compared with 24 percent in the last five years.Some marketplaces are becoming saturated and future growth will no longer come from acquiring new customers. Take credit cards: over the past decade, almost all revenue growth in Tier 1 and Tier 2 cities came from newly acquired customers. Over the next decade, we estimate that more than 50 percent of credit card revenue growth will come from deepening existing customer relationships.In the future, Chinese retail banks must develop a thoughtful strategy on where and how to play. Banks can focus on the pockets of growth in customer segments, product lines, and geographies, depending on their specific capabilities. In the past, the strategies, product offerings, and operational models of Chinese retail banks were largely homogeneous. That time is past.CHANGING INDUSTRY LANDSCAPEChinese retail banks will face fundamental changes in the external market environment, including changing consumer behavior, rising funding costs, intensifying competition, new technologies, and heavier regulation.Changing consumer behavior. Chinese consumers are becoming more sophisticated, more demanding, and less loyal, McKinsey’s personal financial services survey found last year. They hold more financial products – the average number of financial products per customer increased from 3.6 in 2007 to 4.0 in 2011 – and are more open to financial advice. In our survey, 67 percent of customers in China said they were open to investment advice and assistance, compared with an Asia average of 50 percent. Chinese customers are less satisfied, more reluctant to recommend, and less willing to stay with their primary banks than other consumers in Asia. Some 80 percent of Chinese customers are satisfied with their primary bank, compared with an average of 84 percent in Growth Asia markets. Only 55 percent of them would re-select their existing bank as their primary bank, lower than the 58 percent Asia average and much lower than the 66 percent average for Developed Asia markets. Lastly, only 47 percent of customers would recommend their primary bank, down from 57 percent in 2007 and much lower than the 60 percent Growth Asia average level. As a result, customers prefer to regularly shop around for financial products. Our survey shows that almost 70 percent of Chinese consumers believe “shopping around for financial products is worth the effort,” higher than the Asia average of 60 percent and much higher than the 40 to 50 percent for affluent segments in mature Asian markets.China Retail Banking Whitepaper_English.indd 992012/3/28 10:25:3310China Retail Banking Whitepaper_English.indd 10Chinese customers are also more demanding. The need for a better customer service experience and more professional advice drives customers away from big banks, especially in more affluent segments. For example, while about 80 percent of Chinese consumers continue to choose the “Big Four” as their primary banks, the percentage of secondary banking relationships owned by the Big Four has declined sharply, from 75 percent in 2004 to 60 percent in 2011. Also, alternative banking channels are picking up fast. Penetration of automated teller machines rose from 53 percent in 2007 to 84 percent in 2011; telephone banking, from 4 to 12 percent; Internet banking, from 3 to 18 percent; and mobile banking, from 1 to 3 percent. Very importantly, we observe that popularity of alternative channels is consistent across city tiers and age groups. Therefore, a multi-channel, multi-access customer interaction model is essential to the success of next-generation Chinese retail banks.Rising funding costs. We believe the structural shift in personal financial assets from deposits will continue, driven by inflation-adjusted negative interest rates and increasing awareness and availability of alternative wealth management products. In 2005, deposits represented 73 percent of personal financial assets. Today, they are at 60 percent, still well above the 22 percent in the United States and 17 percent in Hong Kong. Given the regulatory upper-limit loan-to-deposit ratio of 75 percent, and despite the fact that for most banks in China retail deposits already account for less than 30 percent of their total funding base, retail deposits are becoming an increasingly scarce and highly valuable resource. As a result, the battle for deposits is fierce and effective deposit rates have already increased. For example, there has been a surge in sales of risk-free structural deposit products – their volume more than doubled in the last two years, while returns edged up by as much as 200 basis points. As banks earn little from these costly funding instruments, their profitability will be hurt quite substantially.Intensifying competition. Aside from the fierce competition on deposits and other sources of funding, the number of bank branches has increased steadily over the last few years. Despite the financial crisis, 7,340 new branches were opened in China in 2009 and 2010 alone. Bank branch density in Beijing and Shanghai already matches Hong Kong and Taiwan; for example, the number of bank branches per 10,000 people in Beijing and in Hong Kong was 1.8 in 2010. In Shanghai and Taiwan, there were 1.4. Emergence of new technologies. Four technological trends – the ability to address customer needs in real time, the Internet of things, cloud computing, and technology-driven business models -- are shaping customer behavior and banks’ operating model in areas such as online and mobile payment; marketing campaigns through the Internet; and data-driven risk management. Escalating regulatory pressure. Interest rate deregulation is one of the clear trends for the Chinese banking industry in the next decade. The impact will be gradual compression of net interest margins and the need to build better risk, pricing, and marketing capabilities to maintain higher margins. Regulators have begun to eliminate certain retail banking fees while acting to increase fee 2012/3/28 10:25:33Next generation retail banking in China Building eight transformational capabilitiestransparency. This will lead to lower-than-expected growth in transactional fee income.In this changing landscape, Chinese retail banks must retool themselves by building new capabilities. (Exhibit 5) Exhibit 5China retail banking is entering a new eraMatureMaturingNascentEmergingChina 2020secure market shareLand grabbing to Old battlefield: ytBuilding next generation New battlefield:irutamorientation and distin-bank with customer tectivecapabilitieskraMChina China20002011▪▪Diversifying consumer ▪▪s▪Basic banking needsneedserPassive in customer Rising competition▪Sophisticated customersDiverging bank ▪Mature customersCompressed margin u▪Little competition yteainteractions▪▪Focus on network ▪Much slower growthIndustry consolidationKef▪expansion▪performanceRelationship-driven multi-▪Product-push approach▪Focus on customer valueproduct approach ▪Land grab to secure Shift from growing no. of s▪Spot white spaces and Manage costsgeuntapped demand first market leadership and ▪clients to improving profits ▪Increase marginal inginefirst mover advantage▪per client▪productivitytnairDifferentiate and segment “Steal”share to get scaleWtsofferings▪▪Raise capital productivitySOURCE: McKinsey analysisThe successful retail banks in China have built their franchise with capabilities that were valuable in the early phases of market development, including spotting white spaces and excelling in the “land grab” for customers. In the next decade, a new set of capabilities will be required.China Retail Banking Whitepaper_English.indd 11112012/3/28 10:25:3312China Retail Banking Whitepaper_English.indd 12Winning the Retail Banking gameWinners in Chinese retail banking in the next decade will be those that can build not only a sizable franchise, but a profitable one too. The new market realities call for a different model: Chinese banks must shift attention from increasing the number of customers to improving profit per customer. In our experience, this will require a holistic transformation.BUILDING PRIMARY BANKING RELATIONSHIPSOur research shows that Chinese consumers, across segments, place nearly 70 percent of assets with their primary bank. According to our personal financial services survey, converting primary banking relationships from mere frequent usage (primary or secondary relations) is also the biggest bottleneck for most Chinese banks. For example, these conversion rates range from 12 percent to 30 percent for non-Big Four Chinese banks, compared with 54 percent for Japanese banks and 51 percent for Taiwanese banks. (Exhibit 6)Exhibit 6Converting primary banking relationships is the most xConversion ratio (%)important bottleneck for most Chinese banksNumber of customers in survey sample (China=3005, Japan=400, Taiwan=404), percent使用Use1Primary or secondary Primary relationrelationshipRecommendBig Four522778409545184621391Joint Stock Bank124756697241681118City Commercial Bank287581683050137Foreign Bank17315121120Japan13125774354400831Taiwan150053790514042183SOURCE: McKinsey China personal financial services survey 2011; McKinsey analysisIn our experience, effective cross-selling and superior customer experience are the critical path to building more primary banking relationships (Exhibit 7).2012/3/28 10:25:33Next generation retail banking in China Building eight transformational capabilitiesCross-selling of “high stickiness” transaction and wealth management products is a very effective way to drive customer loyalty. In the context of China, we found the choice of primary bank for customers is highly driven by the usage of products like payroll, utility payment, trading of stocks and other investment accounts, but less driven by credit card and lending products. Exhibit 7Effective cross-selling and delivery of superior customer experiences are the critical path to build more primary banking relationshipsCross-selling▪Cross sell transactional products to increase High Primary ▪customer stickinessCross sell wealth banking management products to relationshipincrease share of walletAuMCustomer experience+▪Enhance customer experience with particular focus on the Moments of Low TruthsLow High Transactional frequencySOURCE: McKinsey analysisInternationally, Wells Fargo, the second largest retail bank in the United States, has customer insight and cross-selling at the core of its strategy with the “Gr-eight” vision (each customer holding at least eight products with them). As its company value and mission statement says: “The more we give our customers what they need, the more we know about them. The more we know about their other financial needs, the easier it is for them to bring us more of their business. The more business they do with us, the better value they receive, the more loyal they are. The longer they stay with us, the more opportunities we have to satisfy even more of their financial needs.” With this vision firmly established across the organization, Wells Fargo managed to navigate the financial crisis relatively unscathed and ranks as one of the most valuable banks in the world. Customer experience plays another critical role in building primary banking relationship. Chinese retail banks typically suffer 30 to 40 percent customer attrition, defined as a migration to a lower assets-under-management band within a year. This is well above the experiences of their international peers. Our personal financial services survey has found that 12 of the top 15 loyalty drivers are customer-experience related. (Exhibit 8) Therefore, delivering a first class, end-to-end customer experience is a critical building block in acquiring and retaining primary banking relationships. China Retail Banking Whitepaper_English.indd 13132012/3/28 10:25:3314Exhibit 8Customer attrition is high in China and customer Customer experienceexperiences is critical to drive loyalty12 of the 15 loyalty drivers are customer experience relatedImportanceLoyalty drivers in an order of importanceHigh1. Employees are familiar with bank procedures2. Branch offices are in locations that are convenient for me to visit3. The company rarely makes mistakes with my account(s)4. The ATMs are in convenient locations5. Employees are courteous and provide friendly services6. The company respects my privacy7. They offer a full range of financial products and services8. The company delivers on its promises to its customers9.If there is a problem with my accounts, the company is quick toresolve it10. Employees are knowledgeable about the products and services available11. The physical layout of the branch and the signage make it easy for me12. Employees are willing to go out of their way to help me13. The company is a leading brand in the market14. I feel secure that I will get my money back if something happens to the bankLow15. Employees try to understand my needs and make sure I get appropriate product/serviceSOURCE: McKinsey China personal financial services survey 2011BUILDING EIGHT TRANSFORMATIONAL CAPABILITIES The new market realities call for a different model that could fulfill three strategic objectives: building more profitable and sustainable primary relationships, carrying out smarter and more focused customer acquisition, and developing a low-cost and scalable operating model. To achieve these objectives, Chinese banks must build capabilities to manage customer for value, improve customer experiences and operational efficiency, build organization enablers, as well as manage capital and funding efficiency. We have identified eight transformational capabilities that will set the winners apart from the losers. (Exhibit 9) Exhibit 9Building 8 transformational capabilitiesManage 1▪“Big Data”enabled customer analytics for effective cross-selling customer for value2▪“Pricing 2.0”as a source of competitive edge3▪“New risk paradigm”to manage risks in a scalable and profitable mannerDeliver better 4▪“E2Etransformation”to enhance customer experiences and customer service operational efficiencyat lower cost5▪“Innovative institution”leveraging ubiquitous technologyAdvance 6▪“Big Retail”with more vertical, professional and nimble retail organization and organization structurepeople7▪“Capability for Performance”to deliver sustained performanceManage capital 8▪“Next-generation asset-liability management”as a means of and funding improving loan yields and reducing funding costsefficiencySOURCE: McKinsey analysisChina Retail Banking Whitepaper_English.indd 142012/3/28 10:25:33Next generation retail banking in China Building eight transformational capabilitiesManage customer for value1. “Big Data” for more effective cross-selling. One common indicator for depth of a customer relationship with a bank is product holdings per customer. In China, the average is just 1.6, well behind international best practice of five to eight. Banks can move the needle on cross-selling and deepening customer’s wallet share by bringing the power of data analytics to their frontline and to the customer. Through exploitation of data across the organization, banks acquire a much deeper understanding of customer segments and their value. With these insights, banks can offer customers much more tailored, more innovative, and integrated product bundles, and deliver highly targeted next-product-to-sell campaigns. For example, through effective data-mining and stringent execution, we have seen a joint stock bank successfully convert 15 percent of its mortgage customers to mass-affluent wealth management customers.2. “Pricing 2.0” as a source of competitive edge. Our experience with several banking clients in China shows that pricing can be a powerful performance lever. In China, banks should build the tools and capabilities necessary to optimize list prices on a frequent basis, do continuous price benchmarking across the network, introduce discount monitoring, and develop advanced pricing models to support the frontline, incorporating customer elasticity and risk scores. To execute these changes, pricing should become an explicit function within the bank, with experts focused on supporting the business. Management information systems must offer a clear understanding of the impact of pricing decisions on volumes and profitability. This runs from simple frontline information to track leakage and from how the frontline uses its discretion on pricing to more elaborate tools to optimize pricing decisions across products and customer relationships. 3. “New risk paradigm” to manage risks in a scalable and profitable manner. In the aftermath of the financial crisis, banks worldwide are rethinking their risk management model. Banks globally are recognizing that relegating risk management to a “machine room” that produces complex analyses and “black box” models is not sufficient. It is equally important for Chinese banks to establish a scalable and profitable risk paradigm, with emphasis on transparency, risk ownership, and governance. Four pillars would underpin a new risk approach for Chinese banks: developing early warning systems and stress testing through cycles and scenarios; assigning clear, natural risk ownership and accountability; a governance structure that forces business units to account for risk, not just the chief risk officer; and ensuring that incentives are fully aligned with the risk appetite of the bank. For Chinese retail banks, operational risks and fraud prevention are often a bigger challenge than customer default. Hence, it is even more important to look beyond the risk model and focus on building the right risk culture through proper organizational setup and incentives. Furthermore, better risk understanding will also help in identifying potential loan customers within the banks’ existing customer base, and thus allowing banks to acquire them more effectively with pre-approved credit lines and loan products.Deliver better customer service at lower cost4. “End-to-end transformation” to enhance customer experience and operational efficiency. Despite the CBRC call for transforming from a China Retail Banking Whitepaper_English.indd 15152012/3/28 10:25:3316China Retail Banking Whitepaper_English.indd 16“department bank” into a “process bank,” very few Chinese banks have cracked the code in this journey. By “end-to-end transformation,” we mean a customer-centric, cross-functional approach to simplify radically the banking process and dramatically improve customer experience. To accomplish this, banks should undertake a detailed mapping and re-design of customer experiences, with a particular focus on moments of truth - interactions when consumers invest a high amount of emotional energy in the outcome (such as a lost credit card). In Asia, we have seen banks improve customer satisfaction levels by 20 percent (defined as the percentage of customers who rate experience with the bank as “distinctive” and “very satisfied”) through a two-year, end-to-end transformation of eight critical customer processes. The typical challenge faced by Chinese banks is that the current organization structure does not support cross-function collaboration. Therefore, a CEO-championed transformation with a strong Project Management Office to coordinate and drive change is critical for Chinese banks who want to embark on this journey. The other value of an end-to-end transformation is cost reduction. By applying lean principles, an end-to-end transformation can help reduce unit costs by 20 to 30 percent. For example, a Southeast Asian bank reduced its total operating costs by 20 percent through standardization of 70 to 80 percent of transaction processing and automation of more than 50 percent of credit approvals in retail and small business segments.5. Building an “innovative institution” leveraging ubiquitous technology. On the one hand, technology is a fundamental enabler for all the other transformation capabilities. Without state-of-the-art business technology at the core of their operational model, banks can hardly meet increasingly sophisticated customer needs, or effectively compete with peers in the future retail banking game. On the other hand, the advancement in technology has made it possible for non-traditional players to create disruptive business models. Third-party payment companies already represent one-quarter of transactions in China after just five years of operation. Once regulation permits, these companies will try to leverage the payment flows to cross-sell investment, insurance, and lending products to customers, threatening the core of retail banks’ business. Retail banks in China will have to respond decisively and forcefully before it is too late. Taking the next step in technology will require banks to revamp their business technology infrastructure and related operational processes, while setting up a truly innovative organization for the future. An “innovative institution” of the future needs to establish dedicated organizational units, recruit non-traditional talent (for example, from Internet companies), and allocate sufficient funding for innovation. Banks must build a culture of innovation through key performance indicators and management processes.Advance organization and people6. “Big Retail,” with more vertical, professional, and nimble organization structure. One of the key constraints for many Chinese retail banks is weak execution at the branch and sub-branch level because of a geography-oriented organizational setup. Resources are not dedicated to retail and are re-directed to other functions for short-term profitability reasons or 2012/3/28 10:25:33Next generation retail banking in China Building eight transformational capabilitiescontrol concern. The unequal caliber of people running retail business results in highly divergent performance. Implementation of new business models is harder because of the different level of understanding and focus of each branch and sub-branch manager. In the future, we envision that winning retail banks will move toward a more vertical, professional, and nimble organization structure, although they will not be able to copy exactly the Western bank model because of complexities such asthe geography-based regulatory regime in China. 7. “Capability for Performance” to deliver sustained performance. Successful transformation hinges on people. McKinsey research has shown that 70 percent of transformations fail because of people issues. Take branch transformation: almost all Chinese retail banks have gone through one or multiple rounds of branch transformation, yet most failed to deliver sustained impact. The main reason is that the banks approach the transformation as a quick top-down campaign without addressing their fundamental capability gaps. A common pitfall is equating capability building with training. McKinsey research has found that pure classroom training is actually one of the least effective ways to develop people. Job rotation, special project assignment, and effective mentoring and coaching are much more powerful ways to develop employees. Manage capital and funding efficiency8. “Next-generation asset-liability management” as a means of improving loan yields and reducing funding costs. The current business model of all Chinese banks optimizes for growth rather than return on equity. That makes a lot of sense in an environment where winning the most customers was key. In the coming era, however, managing funding and capital becomes more important. This transformation starts with developing a deep understanding of the risk-adjusted return of loans to different segments and cost of funding of different types of deposits and making conscious choices about how to achieve an optimal balance sheet structure. For example, one of our clients managed to lift its net interest margin by 50 basis points through careful planning and execution of an asset-liability management strategy.***A customer-centric transformation to build the eight capabilities is not easy, but it is essential. Winners in Chinese retail banking in the next decade will be those that can transform themselves in response to the new market realities and refocus on customer value. To do this, Chinese retail banking executives must define an integrated transformation agenda and a clear plan for how the eight transformational capabilities mentioned above will be developed and nurtured. They must also build an infrastructure to support the change as well as address the “soft” cultural aspects of change in parallel with the “hard” business issues. China Retail Banking Whitepaper_English.indd 17172012/3/28 10:25:34China Retail Banking Whitepaper_English.indd 182012/3/28 10:25:34For more information, please contact:Emmanuel PitsilisDirector, Hong KongEmail: emmanuel_pitsilis@mckinsey.comJan BellensPartner, ShanghaiEmail: jan_bellens@mckinsey.comJun XuAssociate Partner, ShanghaiEmail: jun_xu@mckinsey.comChina Retail Banking Whitepaper_English.indd 192012/3/28 10:25:34McKinsey Asia FIG PracticeMarch 2012Layout by GCO NewMediaCopyright © McKinsey & Company www.mckinseychina.comChina Retail Banking Whitepaper_English.indd 202012/3/28 10:25:34