Traditional banking vs. Internet finance, who is the king glory?

May 23, 2017 4 mins read
Traditional banking vs. Internet finance, who is the king glory?

First of all, it’s not a true-or-false or a multiple choice question, but should be a SAQ. In the market nowadays with rapidly developing economy, there is no pure traditional banking industry or internet finance platform. In order to obtain long-term development opportunities and market prospects, the two should complement each other; such as Ma Yun's MYbank, Standard Chartered Bank investing Dian Rong network and so on. These examples illustrate the interdependence of bank and Internet finance . But can the two be in a really good coexistence, or will one of them replace the other in the future, and ultimately become the King of Glory?

1. What is Internet finance ?

To form an impact on traditional banking, first, such impact will have to be exerted by a financial institution just like banks, who can create a competitive relationship with banks. However, the initial "Internet Finance " is only a financial information intermediary rather than financial institution. Legal financial institution we so called must have related licenses issued by government, such as banks, insurance, securities and trust funds licenses. Only with these licenses can it be a traditional financial institution. However, internet finance has now been covered by financial regulatory agencies. Although internet finance institutions may apply for third-party payment license or consumption financial license,  only few of them can get the licenses successfully due to the high supervision threshold and strict restriction on licenses quantity made. So most of the so-called Internet finance still fall in the financial intermediary category.

Thus, whether financial institutions or financial intermediaries, both of which can have traditional offline business on the one hand and rely on the Internet on the other hand. So the Internet and banks are not contradictory to each other, but are mutually beneficial.

2. Are traditional banking and the Internet conflicting?

When the Internet is more and more developed, traditional financial institutions have already started to combine with the Internet for a long time. They first generated online banking, online financial, online securities, are all initially internet finance , and are also traditional financial business. The role of the Internet is to subdivide the financial industry and make the division of labor more clear, the traditional financial institutions specializing in financial business; while Internet financial business is stripped from the traditional financial institutions, being left to the professional financial intermediaries. The fact that micro finance business, and third-party payment business, which should not be run by the bank, are operated by professional financial intermediary,  is a good embodiment. some card issuers such as Visa and MasterCard, are professional payment intermediaries, who cooperate with banks to form a supplement relationship, but they themselves do not operate banking business.

Therefore, the Internet finance and traditional financial services have a complementary relationship, only by taking advantage of each other mutually can we better refine the financial division of labor.

3. The talent conversion between traditional banking and internet finance

As a financial headhunter, we now see more and more job seekers transforming from traditional banking to Internet finance. Some succeeded and some failed, depending on the platform self-development and the adaptability of these person's background. Not everyone is suitable for such a transformation, at which point the following two cannot be left unmentioned,

  • Think outside the box. A mature bank must have a strict process control system, and it is one of the most basic and yet  most important requirements for the bank's staff to control and follow the system. Thus, the staff's thinking mode will inevitably be cured in the long term, and they are not willing to jump out of the process to make a breakthrough. However, Internet finance is a constantly innovating and changing industry, entering this field requires continuous follow-up on the latest market and technology trends with a flexible entrepreneurial spirit.
  • Change the business starting point. Banks have been feeding on the licenses for a long time, as the provider of funds and financial services, they are in high position when it comes to negotiation mostly, forming the thinking of weakening customer experience and maximizing their own business profit. While Internet finance emphasizes profit sharing, starting from customer experience, attracting more people to use products, forming customer quantity increasing in geometric multiples, and ultimately  achieving the deserved profits. So their different heights in business thinking and customer base are the points that job seekers need to consider in terms of career transformation in which so many experience failure due to the fact that they could not understand the industry or its products. The most important for transformation is the ideological and cognitive changes.

To summarize, whether in customer channels, financial products, or talent pool, the traditional banking and Internet finance are independent entity but never can be separated from each other. Internet finance does bring an impact to traditional banking that cannot be ignored, but the banking industry is also responding. The key point is how to better take their advantages to maximize the utilization of resources. So there is no winner or loser, what we should do is to look forward to the two cooperating with each other and bringing more interesting chemical reactions in the future.

Grace Su's picture
Grace Su
Senior Manager | Financial Services Recruitment
gsu@morganmckinley.com