Within the next 10 years, 80% of cash and 60% of credit cards in China will disappear, with mobile wallets replacing them. In 15 years, the front desk services of most small and midsize financial institutions will be performed by third parties. These channels will become smaller, more community-based, intelligent, diversified, and embedded.

In the report Innovation in Chinese Retail Banking Digital Channels: Internet Banking and Mobile Banking Will Be Replaced, Celent examines transaction trends, innovation in digital channels, and the strategies of innovative banks.

Celent estimates that the utilization of traditional channels such as ATMs, bank cards, Internet banking, and network branches will drop by half. Bank channels will become embedded into other services and applications, and bank services such as payments, loans, and foreign exchange will all be embedded into other services and applications, such as online education and medical treatment.

Social networking will be another trend that displaces traditional banking channels. Social networking is an important access point for e-commerce, O2O, and other services. For example, Ping An’s strategy is based on “social networking finance,” which is integrated with “medical services, food, accommodation, travel and play.”

“In the future, e-commerce, O2O, social networking, and other channels of Internet firms will gradually replace the existing electronic banking channels,” says Hua Zhang, an analyst with Celent’s Asian Financial Services practice and author of the report. “For large banks, the electronification of banking channels will not be simply about moving banking services to the Internet or mobile phones, but about developing banking channels based on the characteristics of the Internet.”

This report provides an overview of digital channels in China, including discussion of digital channel innovations, banks’ strategies, and business models.