As the new century unfolds, people are saying that commercial banks will be a dinosaur in the 21st century, heading for destruction as a result of financial disintermediation and internet technologies. On the contrary, commercial banking around the world takes the sheen off that behemoth investment banking and sits in the driver's seat in the financial sector. This may be a result of industrial reform and reshuffling brought by the international financial crisis. But the major reason behind should be the wide adoption of information technology in a bank's business and management. The technological advances have made it possible for the banks to re-build service models. Looking at the growth of the banks around the world, to a modern commercial bank information technologies are now an integral part of the business management, and an important factor to judge the standard of customer services and business management.

Worthy of note is that, large banks in China, while moving forward the reform, swept into IT revolution in the banks around the world and built modern banking IT platforms from a high starting ground. In IT development, they successfully achieved leap-frog progress and made one solid step forward to become the world's leading global banks besides providing strong support for their customer services.

A Decade of Hard Work

Large commercial banks in China have gone a long way in computerization. ICBC is a case in point. Shortly after establishment in 1984, ICBC staff used abacus to handle 99% transactions. At that time ICBC had only 7 mini computers and several dozens of micro computers. With all the efforts from generations of employees, ICBC started from computerization for outlets, using micro computers then local area network of mid-range and small computers - then mainframe, computer centers in provinces and branches -  provincial centers managed under two data centers (North data center and South data center) in 2002 - consolidation of two data centers in 2004. ICBC is the first bank in China to centralize all data. Data centralization means to process all kinds of data in different branches and subsidiaries of ICBC at all levels under one system. In the end, all the isolated information islands in over ten thousands of ICBC branches and subsidiaries are consolidated under one highly efficient online network. This lays a solid foundation for ICBC to use IT to restructure all banking businesses.

At present, ICBC's "IT Brain" - large data center, is on par with international standards, leading all other banks in the world in terms of business processing capacity. ICBC's data center manages and maintains data for around 600 million accounts. Every day the center processes 170 billion transactions on average to a peak of over 210 million and 5,000+ transactions concurrently every second. When it comes to the business operation and capacity, it would be hard to top ICBC. ICBC offers a full range of financial services round-the-clock to worldwide customers backed by 16,000+ branches around the world, 59,000 ATMs, 39,000 self-service terminals, 800,000+ POS and a powerful electronic banking system. Today, ICBC registers an annual turnover of RMB 135 billion in RMB settlement, nearly RMB 300 trillion in electronic banking transactions and RMB 4.8 trillion in ATM transactions. Given the rocketing growth of transaction turnover, availability of ICBC IT system is always over 99.98%, on par with international standards regardless of processing capacity or system stability.

In a bank, if a large data center is an information highway, then the application systems are synonymous to a high-performance management scheduling system. Since the first generation business application system was online in the mid-1980s, ICBC adhered to the principle of independent development and launched four generations of core information systems. The first generation system enabling ICBC electronic banking from nothing, manual processing to online, automated processing laid a solid technical ground for ICBC's computerization. The second generation system, the first large core banking application system independently developed by ICBC to centralize all data in all branches, marked an epoch change of ICBC to a commercial bank. The third generation system, a banking system including 7 modules, 19 sub-systems, 202 application systems and nearly 50,000 database reports and over 150,000 programs, provides all the functions for business operations, management and decision-making and different systems for customer service, electronic banking, credit risk management and decision support. The third generation system was a strong technical support for ICBC to move forward from shareholding restructuring to becoming a modern financial firm. Based on this, ICBC's fourth generation IT system started in 2008 was online in end-2011, a new generation of system that enables "unified customer view, independent audit, flexible product allocation, integrated overseas applications, centralized management information and comprehensive risk management". ICBC reinforces its technological leadership among the other banks in China and becomes one of the most excellent IT banks of the world.

It has not been easy for ICBC to gain its technology leadership. First of all, the Bank needs to think ahead and create essential "top level design". To a great extent, the success of ICBC in IT owes very much to the thorough understanding and accurate positioning of ICBC characteristics and IT development. Besides, IT development needs large and continuous funding. ICBC spent more than RMB 5 billion in IT every year on average during the last few years. More worthy of note is that, technological leadership is something that cannot be bought. A strong IT team is a must to achieve an IT competitive advantage that "cannot be learnt or copied" by others. ICBC has a team of 13,000 IT employees, the largest, strongest and most professional team among all commercial banks as of today. ICBC also sets up the largest software development center in China with nearly 5,000 IT staff working on software development. Through continuous innovation on information technology and business, nearly a thousand innovative ICBC business applications are put into production every year. They represent new service platforms or knock-out products that reach across different business segments - customer services, global market, bank card, electronic banking, and provide strong support for ICBC to improve services, speed up reform, go international and strengthen risk management.

Information system security is always a top priority of ICBC when building an IT system for centralized management and convenient services. Under the principle of "Security First", ICBC concentrates on centralized online operation in all branches incorporating strong security and IT risk control. Meanwhile, ICBC steps up its effort on IT infrastructure. In 2005, ICBC built the largest disaster backup system among all the banks in China spanning a distance of one thousand kilometers. In 2011, ICBC set up Data Center (Shanghai) New Park, the first bank in China to build a system that is able to switch and take-over production operation uninterrupted. Disaster protection measures are taken on all application systems for backup and recovery. In 2012, computer rooms will be completed in all tier-1 branches for disaster backup, faster response and recovery to ensure continuous availability of production applications in case of sudden events.

Core Competence through IT Revolution

Today, every banking customer can enjoy the convenience brought by the state-of-art information technology of banks. Large corporation groups can pool in a fraction of a second the funds in hundreds of accounts in China or even worldwide to one account specified by the headquarters. Loans can be applied, drawn or repaid once you are online, anytime, anywhere. You can send remittance to a bank account over thousands miles away, in real-time. Anytime, anywhere, you can use mobile phone to buy or sell gold. You can pay water bill, electricity bill, gas bill or mobile phone fee without walking even out your front door. As long as you hold a credit card, you can shop anywhere around the world. To ask for further information on ICBC services, just send a SMS . With a mobile phone, you can pay by e-cash, fast and easy.......

All these changes reflect the significant improvement of core competence in banks as a result of IT deployment over the course of more than a decade. ICBC is an example. ICBC leapfrogs into new technology and begins the road of financial innovation driven by technology, instead of using an abacus and a pen, the labor-intensive manual processing. Through continuous service upgrade and product innovation, ICBC expands its capabilities in service supply, product innovation and customer services and turns innovations into applications, backed by state-of-the-art system to ensure customized delivery. Besides, ICBC leverages its powerful IT platform to streamline its management and changes to a new management system of a modern commercial bank.

First of all, advanced systems and strong R&D allow ICBC to create innovative products to better align with customer demands. ICBC received numerous IT awards from UK The Banker, Best Data Center from Asian Banker, and "Best IT Bank" from Chinese Banker for multiple times. For many times ICBC has been included in China's Best 500 Enterprises for computerization and ranked No.1. Since 2000, 170 of the ICBC IT achievements won the People's Bank of China's Technology Progress Awards. That included the first Top Honor Award for ICBC data centralization project, 12 First Class Awards and 55 Second Class Awards. Besides, ICBC received 48 new state patents just in the year 2011. ICBC sits atop of the league table by capturing over 60% of all patents in China banking sector, to 178 state patents as of today. In 2010, ICBC received "WIPO Utilization Award - Gold Award" from World Intellectual Property Organization (WIPO), the first financial institution in China to receive the award. More important, these innovations have been quickly turned into applications and played a significant role for ICBC to improve its service capability and standard, also lay a solid foundation for ICBC to better serve the economy and society. In terms of financial services to corporate clients, ICBC launched Bank-Enterprise Interlink services to bring safe, real-time and customized online banking services using the resources of both sides through interconnection between ICBC Internet Banking system and financial management software of the company. The financial person of a company no longer needs to run between the company and bank. Through this innovative product, ICBC provides services for customers covering 209 functions under 9 categories (account management, payment service, collection service, treasury management, wealth management, electronic bill, e-commerce, supply chain finance and international settlement). To a company, by connecting financial system to ICBC's Bank-Enterprise Interlink platform, it is very convenient to use own financial system to manage account, pool/allocate company funds, collect and make payments and many unique services, while at the same time reduce the cost of financial management and improve management. ICBC had 3,243 products by end-2011. Through the launch of new products that cater to the needs of the customers, ICBC products cover all business areas in capital markets, monetary markets and insurance markets. Today in China's financial market, ICBC is the financial institution with the widest, most complete range of products and the strongest service capability. With 1,354 new products and services on the pipeline at present, ICBC maintains its momentum to supply innovative, best-quality financial products to all.

Besides huge improvement in service standard, the wide adoption of information technology is gaining weight for a commercial bank to reduce management and operation cost and oversee a transformation. For example, electronic banking exemplified by Internet Banking is playing a pivotal role to ICBC given its rising number of customers and improvement in service capability. At present, electronic banking has become the ICBC main channel for transactions and services. ICBC services are in the stage of "electronic finance, green finance" on the back of continued expansion of its customer service capabilities. Meanwhile, the fast growth of electronic banking services relieves the conflict between limited outlets and rollicking transaction turnover, and boosts the business growth as well as service efficiency. Every day, online transactions through ICBC electronic banking have surpassed all of that processed through ICBC outlets. Seven out of ten transactions are processed online, tantamount to another ICBC built on the electronic channel. If counting the cost difference between one electronic banking transaction and one counter transaction, around RMB 30 billion in operation cost has been saved just in 2011.

The strong technological capabilities also allow ICBC to extend its services and management across the borders, from distributed operation to coordinated growth between domestic and overseas branches. With an aim to better serve the Chinese enterprises "going global", ICBC steps up its effort on internationalization and global product offering. On this ground, FOVA, a system independently developed by ICBC, has  been installed in all 35 ICBC overseas subsidiaries to offer a whole range of customized products and competitive value-added services for overseas customers encompassing overseas internet banking, trade processing center, credit management, credit card, FX trading and trading of precious metal via account. With the customer services, operational risk management, audit processing and other systems incorporated into FOVA system, all ICBC customers around the world experience the same "One ICBC" services.

Business Process Restructuring through IT Revolution

IT revolution changes the services of commercial banks, also bringing fundamental change to a bank's operation management. The adoption of business automation and information management in organization structure, business management, flow design, incentive mechanism provides a catalyst to "process restructuring" in a bank.

First, outlet services can be significantly improved after centralized processing through the wide adoption of information technology. Today, many applications submitted by customers are processed at the middle-office and background. As an example, in the former case the outlets were responsible to authorize ICBC counter services, which means low efficiency and difficulty in control. Now, authorization can be processed from one location and managed through remote server. Customers spend less time to queue up at the counter. Centralized authorization is 5 times faster than distributed authorization in the past. By end-2011, ICBC has designed new processes for 135 products under 37 categories after centralized processing, of which, 33 product categories have been launched in 16,000 outlets. FX remittance by personal customers, issuing of debit cards in batch and bank card applications, non-real time transactions which occupy a lot of time at the ICBC counter and frequently used are under centralized processing in the background. 83% of non-cash transactions by corporate clients are now centralized processed. After centralized processing, for transactions that do not need to process in real-time, tellers only accept but no processing. This greatly reduces the workload to tellers while changing the outlets to promote services and serve the customers instead of processing the customer applications. The remote authorization for approval of loans to micro and small enterprises is another example. A team of professional staff with the best expertise is in charge of approving loan applications sent by marketing teams from all branches. With the modern internet technologies and large database system, electronic written reports can be sent directly via videos or photos to the remote terminals for the staff to review and approve, instead of checking the applications on site. Through video conferencing, ICBC loan staff can talk to the customers face-to-face to understand their conditions. Under this system, loans to micro and small enterprises can be approved faster without adding staff in the middle-office or back-office. Micro and small enterprises can also see their borrowing cost greatly reduced.

To a commercial bank, statistical information is a critical step between front-desk business procedures and management decision and analysis system in the background, a prerequisite and fundamental to make accurate and scientific decisions. In 2002, ICBC was the first bank in China to put online an integrated statistical system, which was a historic breakthrough for ICBC to strengthen its statistical monitoring and automated processing. By dint of information technology, the new system capsizes the former way of reporting from the "lowest level of outlets to the highest level, checking each transaction", instead, reports for Head Office down to every outlet are generated directly by computer using the primary data downloaded. Management efficiency has been enhanced notably in the end. All kinds of reports, including annual reports prepared by thousands of ICBC employees working overtime continuously for several days in the past can now be announced in "T+1" days. In other words, statistical result of previous day can be retrieved every day in the morning. Computer-generated reports eliminate human intervention, which translates to accurate delivery of different business information.

Another example. The application of information technology in internal financial management, decision-making and performance evaluation results in optimized internal management flow, lower management costs and improved management. In 2011, ICBC launched the performance evaluation management MOVA system and global information platform. So far, MOVA system serves ICBC 270,000 users at all levels in different business departments. The 97,000 cases are used to achieve value-oriented performance evaluation using five metrics - institution, department, product, customer and staff. Since its launch, the ICBC global information platform has generated 1,766 sales leads for 37 ICBC branches at home and abroad.

IT Promotes Good Risk Management and Lowers Cost

Banks are companies associated with risks. Risk cost is the largest cost of a bank. To a bank, good or bad risk management directly determines its competitiveness and service standard. In risk management, ICBC fully embraces information technology and develops a host of risk management systems to control credit risk, financial risk and operational risk. This plays a critical role for ICBC to continuously improve its asset quality and control the cost of different risks effectively.

Take ICBC's credit risk management as an example. The loan specialist in Beijing can check out any loan released by an outlet in Hainan Sanya, real-time through computer system. Decisions can be made in every detail step, from accepting the loan applications to approval. They use the credit management system launched in 2003, which has been upgraded through the years. The system standardizes all the procedures for every step - investigation during early period, reply and verify, review and approval, loan release, post-lending management, business analysis and archive management. The whole business flow is controlled online and centrally managed. System parameters are set for loan policy and different risk management requirements under hard control, monitoring the whole process (alert before the event, control during the event, monitor after the event) instead of management after the event. A further example. This system directly "rejects" loans that fail to meet the environmental protection standard. So far, over 99.9% of ICBC loan customers are tagged with environmental protection label. In this regard, ICBC has become a "green loan" bank. More important, this change is very important for ICBC to keep its outstanding non-performing loans and bad loan rate "both decline" for consecutive 12 years. Data showed that ICBC's bad loan rate fell drastically from 4.69% since shareholding restructuring in 2005 to 0.89% in the first quarter this year. During the same period, international banks' bad loan rate rose from 1% to 3.5%. What these figures telling us are exactly the big influence of information technology to a bank's competitiveness.

A first-class bank needs first-class financial management and risk control. Since 2005, ICBC started the centralized financial reform. ICBC set up IT system for Head Office and tier-1 branches to manage all "reimbursements" from one location for "hard control" on all financial risks. Through computer systems, Head Office and tier-1 branches monitor, in real-time from remote server, the balance and amount change in the accounts of all sub-branches and subsidiaries, number of reimbursements, accounting processing, salary disbursements and the status of each transaction. This enables full control on the whole financial process - before, during and after. By deploying IT in centralized financial reform, ICBC unifies the audit methods, external payments, audit flow and audit rules at all tier-1 branches. Financial audit entities have been reduced 10 times, efficiency has been improved 7 times, number of new audit subjects is 100 times the former. Head Office can monitor in real-time each accounting transaction submitted by the reimbursement unit and the latest movement of every amount. Head Office can manage and control in real-time the balance and flow of 2,892 payment accounts in all branches. This results in sophisticated financial management, better allocation of financial resources and improved capabilities in financial risk control.

In operational risk management, ICBC uses IT to overhaul its operation system. More than two decades of business review model has been completely changed, replaced by risk management and quality control. New supervision system analyzes the data driven by a risk identification engine. The intelligent supervision model, based on the customer transaction behavior, can automatically identify the risky exceptional transactions. "A sea of staff" is no longer required to check out each transaction. The new supervision system is able to discover and identify risk. In other words, this translates to a better and effective risk identification process. New supervision system uses the concept of managing risks by levels. Supervision is matched with the extent of risk of the target. Resources are centralized for the monitoring of very risky transactions. In the end, much less resources is occupied and efficiency is greatly improved. Under the new supervision system, daily average manual supervision is only 0.6% of the workload before the reform. For every 10,000 monitored transactions, the efficiency of finding risks is 587 times faster before the reform.

Banking industry is an IT-intensive sector. Banking information technology and integration with banking businesses are important factors to measure and affect the customer services and business management of a modern commercial bank. Hence, IT is critical for banks around the world to build its core competence. While moving forward, the further deployment of information technology and financial technology innovation will push the banks to improve its services to the economy and people's everyday life. Further afield, ICBC aims to shape innovative products to address the customer demands through continuous upgrade and improvement, using IT to turn ICBC into a world-class commercial bank.