Chinese banks should focus on developing their retail banking operations that will enable them to diversify the revenue channels while offering a bigger source of profit, a report released by consulting firm McKinsey revealed.

Traditionally, the Chinese lenders have been giving priority to corporate banking as opposed to private customers; however, the decreasing profit margins have forced them to look for other revenue streams, as reported by english.peopledaily.com.cn.

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The US consulting firm in its report weighed that the banks should utilize proper strategy to gain more value from retail clients, whose asset management requirements have been ignored for long.

Citing the McKinsey report, the publication said that the wealth management, consumer credit and services for small and medium firms are growing pillars for Chinese banks’ retail business, which is expected to account for 70% of retail banking revenue by 2020.

Furthermore, retail banking will add more to profits as traditional business brings in less money amid a narrowing interest spread.

The report further forecasted that 37% of Chinese banks’ profit will come from retail banking by 2020, up from 23%, in 2013 and China will have 900 million users in digital banking by 2020, compared to 380 million in 2012.

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A retail banking analyst with McKinsey, Fang Xiyuan told the english.peopledaily.com.cn, "Digital financial service is an important opportunity for both traditional and non-traditional banks."

"Digital banking service is still nascent in China, and the country’s large number of retail clients is still looking for trustworthy providers of multiple services such as investment advice, mobile banking and service platforms for both onshore and offshore products," Fang told the publication.