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Banks trim online fees to woo customers

By Wang Bo (China Daily)
Updated: 2009-06-11 10:20

Chinese banks are offering discounts for online banking services to consolidate their market presence, even as their profit margin from lending is shrinking due to the low cost for new loans.

The fee reduction spree has been sparked by domestic shareholding commercial banks. In April, Minsheng Banking Corporation, a medium-sized commercial lender, took the lead to cap charges for inter-bank online money transfer at 2 yuan per transaction, compared with the 5.5 yuan per transaction it charges over the counter.

China Everbright Bank followed suit in May by slashing charges for online transfer from 0.5 percent of the total transaction value to 0.15 percent, while Citi Group has pledged to provide free of charge service for online yuan-denominated transfers within China from May 10.

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The latest bank to join the fray is Bank of Communications, China's fifth biggest lender, which is planning to trim charges for online fund transfer from 0.7 percent of the total transfer to 0.2 percent.

State-owned banks, such as Industrial and Commercial Bank of China, have also announced small discounts for online transfer fees.

Industry insiders said the price reduction would help banks attract new customers and grab a bigger share in the market, as Internet banking could be a key channel for developing retail banking businesses in the future.

"As our retail banking network is not as developed as that of the big four lenders, it is necessary for us to expand our customer base through online banking service," said a manager at the electronic banking department of China Everbright Bank who declined to be identified.

Analysts said online banking service has its own virtues compared with the traditional over-the-counter banking service. The average cost for the bank to settle a business at branches is about 1 yuan, which is 10 times higher than that of an online transfer.

The development of Internet banking could help ease the workload at retail branches and efficiently improve customer experience, analysts said.

According to a research report made by iResearch Consultancy, China's online transaction volume grew 30.6 percent to 320.9 trillion yuan in 2008.

"China will see the online banking service growing in a fast and stable manner in the next three to five years, as more services could be done through the Internet with the improving IT technology," Sun Yanping, analyst, iResearch Consultancy, said.