Core Viewpoint - Direct banks, once seen as pioneers in the banking industry's embrace of the internet, are now facing significant challenges due to overlapping functionalities with mobile banking and a lack of differentiated competitive strategies, leading to a decline in their numbers and relevance [1][4][9]. Group 1: Development and Decline of Direct Banks - Direct banks were initially launched in 2013 by Beijing Bank and ING Group, becoming a popular innovation in the banking sector, with over 100 banks offering such services at their peak [1][4]. - The decline began around 2019, with many banks, including Minsheng Bank and Guangfa Bank, migrating their direct banking services to mobile banking apps, resulting in a significant reduction in the number of operational direct bank apps [4][9]. - Currently, only about 13 direct bank apps remain available, primarily from small local banks, indicating a drastic reduction from their peak [6][9]. Group 2: Operational Challenges - Direct banks initially thrived due to their online, low-cost operational model but struggled with overlapping functionalities with mobile banking, leading to increased user switching costs and competitive disadvantages [9][10]. - The operational model of many direct banks relies on their parent banks, limiting their decision-making autonomy and slowing product iteration, which further hampers their competitiveness [9][10]. - Only two independent direct banks exist, with both facing significant challenges in their financial performance, indicating the difficulties of sustaining such models in the current market [9][10]. Group 3: Future Prospects - Analysts suggest that the future of direct banks may involve either becoming specialized modules within mobile banking, focusing on high-yield deposits and customized financial products, or transforming into open banking platforms that integrate financial services into everyday life through API connections [10][11]. - The integration of advanced technologies such as AI and the metaverse could provide opportunities for direct banks to innovate and enhance their service offerings, potentially reviving their earlier success [11].

Core Insights - The direct banking model, once a highlight in the fintech wave, is undergoing significant changes, with Beijing Bank announcing the integration of its direct banking services into its "Jingcai Life" mobile banking app by June 25, 2025, marking the first such integration in China [2] - Direct banks, which operate without physical branches and provide services through electronic channels, initially saw explosive growth after their launch, but have faced challenges since 2019, leading to a decline in visibility in annual reports [2] - Several banks, including Hankou Bank and Minsheng Bank, have already integrated or shut down their direct banking apps, raising concerns about the future of direct banking in the market [2] Industry Analysis - Experts attribute the challenges faced by direct banks to factors such as organizational structure, resource allocation from parent banks, and market competition, indicating a lack of a complete service ecosystem and unique competitive advantages [3] - The overlap between services offered by direct banks and traditional mobile banking apps has led to resource wastage, as banks invest in redundant functionalities [3] - The decline of internet traffic benefits and rising customer acquisition costs pose severe challenges to the operational models of direct banks [3] Future Directions - Recommendations for the future of direct banks include developing niche services to create differentiated offerings, enhancing user loyalty through customized financial products [4] - Integrating direct banking functions into mobile banking apps can provide users with more centralized and efficient services, improving user experience and reducing operational costs [4] - The trend of integration and transformation in direct banking is expected to continue, with more banks likely to face similar decisions in the future [4]