Research on the Transformation Path and Strategies of Retail Banking Business in Small and Medium-Sized Banks under the Impact of Digital Payments

This research investigates the strategic transformation of retail banking in small and medium-sized banks (SMBs) in response to the profound disruptions caused by the rapid evolution of digital payment ecosystems. The pervasive adoption of digital payment platforms has significantly eroded SMBs' competitive advantages in core retail banking functions, including payment clearing, deposit retention, and customer relationship management. The imperative for transformation is evident both theoretically and empirically, yet extant literature remains insufficient in addressing scenario-driven, ecosystem-based transformation pathways tailored to SMBs. Through a systematic deconstruction of the underlying disruption mechanisms, this study develops a structured three-phase transformation framework grounded in the principles of asset-light operations, strategic differentiation, and ecosystem symbiosis. A multi-dimensional transformation strategy is proposed, integrating product innovation, technology-driven enablement, collaborative ecosystem partnerships, and data-centric customer lifecycle management. Empirical validation is conducted via comparative case studies of MYbank and Bank of Tianjin, demonstrating the operational viability and strategic effectiveness of the proposed model. The findings underscore the necessity for SMBs to transition toward a "scenario orchestrator" role, capitalizing on their intrinsic resource advantages while mitigating structural constraints. Key recommendations include: (1) SMBs should accelerate the development of embedded finance ecosystems, prioritize adaptive fintech integration, and implement granular customer segmentation strategies; (2) Regulatory bodies should establish a tiered policy support framework, enhance sandbox supervision mechanisms, and facilitate interoperable data infrastructure with unified standards. Future research directions should encompass broader cross-regional samples and employ rigorous econometric analysis to quantify transformation drivers and performance outcomes.