Tech spending at Chinese banks continues to increase

Banking in China is not always easy. Customers opening an account at one branch are often restricted to using that particular location for any transaction more complicated than a deposit or a withdrawal.

But Chinese banks are investing to change this fact. According to a recent report from banking consultancy Celent, spending on technology is on track to reach $11.3 billion by 2011 -- and most of that is focused on improving services for their customers. Approximately 37% of the investment is going towards new systems.

"The information infrastructure at China's four large state-owned banks is very mature and every bank has its own technology team," wrote Zhang Hua, analyst at Celent and author of the report. "At present, most of these banks are focusing on the integration of customer relationship management, support for international business and the strengthening of risk management."

Products he cited include enhanced internet banking, integrated customer information systems and international business support. For example, last year China Merchants Bank began using Deutsche Bank's FX4Cash electronic foreign exchange platform for its cross-border cash management needs and the Agricultural Bank of China mandated Citi for its on-site check processing outside Greater China.

Since China's largest banks, including Industrial and Commercial Bank of China, Bank of China, and China Construction Bank, already have mature IT systems, most of the technology changes are set to occur at the city commercial banks, according to Celent.

"There is a large discrepancy between the technology infrastructure status of China's large and medium-size banks and the city banks," wrote Zhang. He explained that the country's largest banks have mature, comprehensive systems while technology at the smaller local commercial banks tends to be made up of "core systems, information management systems, next-generation call centres and systems to support fee-based business".

According to the China Regulatory Banking Commission, there were 136 city commercial banks at the end of 2008. Well-known names include Pudong Development Bank, Shanghai Commercial Bank and Shenzhen Development Bank.

Zhang predicted technology investment at these local banks would focus on mobile and online banking, better data and risk management, and more centralised systems.

Increased investment in technology at Chinese banks mirrors global trends. According to Celent, North American financial institutions increased their IT spending 1.7% year-on-year to $50.3 billion last year. Citi and Bank of America Merrill Lynch both announced new web portals in September.

Karen Fawcett, group head of transaction banking at Standard Chartered Bank, said in an interview last year that customer requests for increased "provision of information" are pushing the bank to increase its technology budget.

With all the new investment, banking in China may become a little bit easier and hopefully customers will no longer be wedded to a specific branch when managing their finances.