Behind the removal of ICBC's “e-procurement”, banks and e-commerce groups are losing ground

Bank e-commerce, an attempt at business innovation that was born almost ten years ago, finally sadly went out of business.

Recently, it was announced that its e-commerce platform “Finance and e-shopping” personal store related services, as well as services related to public sales in corporate malls, business district sales, and cross-border trade, will stop at 24:00 on June 30.

In fact, at the end of 2021, relevant ICBC insiders told the Titanium Media App that in the next generation update of ICBC's mobile banking, the “e-commerce finance” business will be embedded in it, and the independent app will be discontinued. However, after this shutdown announcement was issued, the above sources confirmed to the Titanium Media App that the “Finance and e-shopping” brand will also be abolished, and some business will be retained in the form of a points mall.

ICBC had been online for eight years (launched in January 2014) before discontinuing personal shopping and other related services. ICBC was also one of the first banks in China to experiment with e-commerce business. At the end of 2012, along with the wave of internet finance, large commercial banks began entering e-commerce platforms, and China Construction Bank pioneered the launch of “Shanrong Business”, the first domestic e-commerce platform for banks. Immediately after that,ICBC“E-Commerce Finance”, Bank of China's “Bank of China E-Commerce Manager”, Agricultural Bank's “E-Commerce Manager”, and Bank of Communications “Jiaobohui” are gradually appearing.

In addition to ICBC choosing to shut down, the “Xingnong Mall” currently operated by the Agricultural Bank will be operated by Agricultural Bank Fintech Co., Ltd. after January 1 of this year; the operator of CCB's “Shanrong Business” platform was changed to Jianxin Financial Services Technology Development Co., Ltd. starting April 25 this year. Information on the relevant business of the Bank of China and Bank of Commerce is also rare.

Ten years later, none of the five major e-commerce platforms have been able to fulfill their ambitions. Where did they fail?

Examples of past leaders

“E-commerce finance” was once seen as a leading example of a bank setting up e-commerce business.

In January 2014, ICBC launched “E-Commerce”, which covers the two major B2C and B2B business layouts — the “Finance e-Shopping” B2C e-commerce platform is positioned as “famous merchants, famous products, and famous stores” and integrates online shopping and consumer credit; a “finance and e-shopping” B2B platform for enterprise customers, providing market models such as supply chain and professional wholesale.

The instant messaging platform “RongeLink” and the direct sales bank “RongeBank” were launched at the same time as “Ronge-e-Shopping”. These three platforms were strongly promoted by Jiang Jianqing, then Chairman of ICBC. ICBC claims that it will strengthen the collaboration, sharing, and sharing of the “three major platforms”, promote the innovation and upgrading of individual Internet finance products to the innovation and upgrading of the overall service model, and accelerate the construction of an Internet finance system with multiple products and excellent quality, active customer transactions, online and offline interaction, and complete service operations.

Along with the implementation of the Internet finance strategy, the heads of ICBC's e-banking department, product innovation management department, and information technology department have all “changed hands” as specific implementing departments of the strategy.

A public report at the time mentioned, “Of the three general managers of “Shuai Yin,” who are in charge of ICBC's three Internet finance strategy departments, two are PhDs and are all EMBA from the China-Europe Business School. They have received systematic business training, have also done a lot of research on internet finance, and they all have branch work experience. The three major departments also have the term “troika” of the e-ICBC strategy within ICBC.

At the beginning of the launch of the business, the “e-Finance” report card was announced in detail in ICBC's financial report. In 2014, the number of registered “e-Commerce” customers exceeded 12 million, and the transaction volume exceeded 70 billion yuan. In 2015, the transaction volume exceeded 800 billion yuan, and registered customers exceeded 30 million;

In 2015, Hou Benqi, then general manager of ICBC's e-banking department, said in an interview with the media that “finance and e-shopping” has become an important platform for strategic transformation for some merchants. Some well-known merchants have begun to shift their main battleground from traditional e-commerce websites that focus on price wars to “finance e-shopping” that puts “quality first”, and that their transaction share has gradually surpassed their share of sales on other e-commerce platforms.

Since then, from 2016 to 2018, the annual transaction volume of ICBC's “e-Commerce” e-commerce platform was 1.27 trillion yuan, 1.03 trillion yuan, and 1.11 trillion yuan, respectively. It is worth noting that it only took 3 years from the launch of “e-Commerce Finance” to the annual transaction scale exceeding 1 trillion dollars, and e-commerce giant Ali worked hard for 12 years to reach this scale.

By the end of 2019, the number of “e-procurement” users reached 0.146 billion. However, since then, there has been little mention of “e-procurement” in ICBC's annual reports.

On December 29, 2021, ICBC issued an announcement stating that it will upgrade the functionality of the “Finance and e-shopping” personal store. After the upgrade, it will shut down the cash-only purchase model for non-proprietary products or services.

Nearly half a year later, a public announcement was made that services related to “e-shopping” personal shopping malls and services related to public sales in corporate malls, business district sales, and cross-border trade will all be discontinued at 24:00 on June 30. For individual users, if they need to redeem points, purchase precious metals and charitable donations, they can log in to mobile banking to process; for corporate users, service functions such as bill brokerage, ICBC collection, and judicial auctions have moved toICBCHomepage of the portal.

Once a group pursuit

The statements and strategic layout of ICBC and other banks when entering e-commerce can give a glimpse of why e-commerce was sought after by banks ten years ago.

The first is the exploration of scenario finance.

The relevant person in charge of ICBC at the time publicly stated that in the 1.0 branch era, the key to bank competition was space and time; in the 2.0 era of online banking, the key to bank competition was functionality and safety; in the 3.0 mobile internet era, the core of competition for banking services was scenario and experience. Whoever had rich application scenarios and a good customer experience could win more customers, and a large number of banking application scenarios were occupied by Internet companies. This was the bank's “pain point” and needed to seek breakthroughs.

Second, data information is obtained through self-operated e-commerce platforms.

Xu Jie, then general manager of China Construction Bank's e-banking department, once said bluntly in response to “why did they establish e-commerce platforms” that traditional banks have a large offline business volume, but they also lose a lot of corporate account information. Through detailed customer transaction records in e-commerce platforms, banks can rate and grant credit in real time, which can solve the problem of information asymmetry.

Xu Jie believes that banks cannot use records of enterprise transactions with third party payment institutions as proof of financing; only information records accumulated through effective transactions through the “Shanrong Business” platform can they form effective financial services.

Furthermore, the establishment of e-commerce platforms was also a key gripper for major state-owned banks to carry out the transformation of internet finance at the time. A person in charge of the relevant business of a major state-owned bank told the Titanium Media App that the reason for setting up an e-commerce platform and launching an independent e-commerce app back then was to try to break through the bank's internal “departmental wall” and reduce resistance to the transformation of Internet finance from within by forming new teams and launching new products.

It can be said that the contribution of a single e-commerce business to sales revenue is far less strategically important in the overall layout of banks. Looking at it now, it's hard to say that the various goals that banks set ten years ago can't be achieved.

As to why banks and e-commerce businesses have been making frequent moves in the past six months, or have chosen to shut down or divest their businesses and relocate their business entities to their subsidiaries. Some reports indicate that this adjustment is related to regulatory requirements. Previously, the supervisory authorities clearly required banks to divest non-bank businesses and not establish non-financial business subsidiaries under banks.

However, there are also opinions that ICBC's current adjustments may not be directly related to supervision; the main reason is that banks do not have a comparative advantage in developing e-commerce business.

Caught in a collective predicament

In 2018, the China Banking Association published statistics on bank e-commerce. By the end of the year, 23 banks had built their own e-commerce platforms. The total number of bank e-commerce transactions in 2018 was 2009.804 billion yuan. This means that ICBC, which has a total transaction volume of more than 1 trillion yuan, has monopolized half of the transaction share, and ICBC's Zunyi branch has also published an article describing “e-procurement as the third largest e-commerce platform in China.”

However, behind the bank's e-commerce business data, its user reviews are also mixed. There is no shortage of loyal fans of banking e-commerce platforms. They believe that large platforms endorse them, convenient installments, low prices, and guarantee authentic products.

At the same time, some market research indicates that it has many problems. In the “National Fintech E-Commerce Consumer Rating Data” report released in recent years by E-Commerce, a consumer mediation platform specializing in e-commerce in China, ICBC's “E-Commerce Finance”, CCB's “Smart Shopping”, and the Bank of China's “Smart Shopping” are often included in the “Not Recommended Use” list. The main issues mentioned include shipping issues, refund issues, internet fraud, product quality, false promotions, and order issues.

The core issue behind this is that compared to e-commerce platforms such as Tmall and JD, banking e-commerce platforms are often just a dropshipping platform.

An e-commerce business person at a stock bank told the Titanium Media App that bank e-commerce has only set up an investment promotion platform. Any brand or agent that meets certain conditions can enter it. The resident party is responsible for logistics and after-sales, and the e-commerce platform should assume the role of operation management in it.

The source also said that some banks have even outsourced this part of the operation management business to other institutions. Furthermore, banks' business characteristics and current regulatory requirements also determine that banks cannot vigorously compete with e-commerce platforms in terms of warehousing, logistics, etc.

In this context, the banking e-commerce service experience is bound to be difficult to compare with e-commerce platforms such as Tmall and JD, and the e-commerce market, which is already mired in the Red Sea, will no longer be able to accommodate the next group of financial crossovers. After nearly ten years of exploration, banks have finally discovered that e-commerce is not a business they are good at.

(This article debuted on the Titanium Media App, Author | Cai Pengcheng, Editor | Tianpeng)

$ICBC (01398.HK)$

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