China's Internet finance industry has expanded rapidly in recent years with the mushrooming of financial technology (fintech). It has changed the path-dependence of traditional financial services and attracted more offline users to mobile terminals. Internet giants, with their advanced technologies and huge traffic, pose as competitors of traditional financial institutions, especially banks, in the field of fintech.

Facing internal and external changes, traditional financial institutions are accelerating their push into the Internet finance sector, with some even upgrading their fintech development to a strategic level. To date, many banks such as China Merchants Bank, China Construction Bank and the Industrial and Commercial Bank of China have established fintech subsidiaries.

These sections are based on the expansion and transformation of certain departments in the original commercial banking system.

Emerging as licensed financial institutions, Internet-based banks maintain continuous expansion momentum in the financial sector while representing new banking forces. They are also plotting their business layout with fintech as the core competence. The information technology, big data and the ecology created by Internet-based banks are deconstructing traditional business models, offering experiences for the transformation of banks in the fintech field.

But whether the fintech subsidiary model can develop smoothly remains uncertain because traditional banks may not have enough faith in its strategic positioning. Though China's banking industry has shown its willingness to increase investment in fintech and digital business, efforts are still insufficient.

(This is an edited excerpt of an article originally published in China Financial Weekly on April 15)