Advanced IT enables foreign banks to offer better service, which can be particularly attractive to affluent customers, says Christopher Formant, executive vice president for global financial services at BearingPoint Inc., a McLean, Va.-based IT outsourcer with a strong presence in China.

To meet that challenge, Chinese banks are ramping up quickly. "I know of a bank rolling out a new core banking platform in less than one year," says Ip. In the West, such a project could take years, he adds.

Chinese banks are able to move so quickly in part because they're deploying new technology so late in the game. The problems they're addressing have already been solved by other banks. "The solutions exist," Opera Solutions' Baltassis says.

But it's not quite as simple as it sounds because the software has to be customized. "Off-the-shelf [software] will cover 90 percent of the distance," he says. "The competition takes place in the last 10 percent."

Many banks in China underestimate the complexity of implementation, Ip says, citing the frequent need to build Chinese-language interfaces. But some say that Chinese banks primarily lack the skills and experience needed to use this technology.