Global banks seeking to capture opportunities in the burgeoning markets of the Greater Bay Area need to ramp up their technological capabilities, and one way to do this is to engage with Chinese tech entities to better serve corporate clients in the region.
As a technology hub, Shenzhen is expected to attract more international financial institutions eager to establish partnerships in the GBA, accounting major KPMG says in a recent report on the banking industry focusing on the GBA.
Corporate clients in the GBA tend to have a higher preference for digital banking solutions. “We have observed that many international companies still struggle to connect to the vast digital ecosystem in mainland China in order to effectively serve their customers. The opportunity for international commercial banks lies in their ability to help these companies to plug into the digital ecosystem onshore, and to provide comprehensive transaction banking services and more seamless payments,” says the report.
The need to enhance fintech capabilities is crucial for global banks that have a relatively limited footprint in China. According to the report, acquiring a physical presence can be more costly, but building up digital channels through partnerships with Chinese local banks with fintech capabilities or fintech firms can be one of the efficient approaches.
“In order to better serve their corporate clients onshore, international banks can consider forging partnerships and alliances with domestic financial institutions, fintech firms and other technology players,” says the report.
In January 2020, Standard Chartered announced its strategic investment into Linklogis, a Tencent-backed supply chain financing platform headquartered in Shenzhen. This marks the bank’s first investment in a supply chain platform in mainland China.
Standard Chartered first partnered with Linklogis in 2019 through a memorandum of understanding on developing a supply chain financing proposition. Linklogis listed in Hong Kong in April this year.
“We expect to see increasing investment and more partnerships between international banks and fintech players in the GBA, leveraging Shenzhen’s status as a key innovation and technology hub,” the report says.
But partnering with existing players in the GBA can be difficult as global banks, being newcomers, can be seen by locals as rivals out to grab their market shares. “International banks will also need to bring something to the table to successfully partner with other established players in the ecosystem,” KPMG suggests.
The report notes that some global banks are working to develop their own fintech arms to drive growth and innovation, enhance their service offerings to clients, and ultimately grow their footprint in the market.