HONG KONG (Reuters) – Hong Kong’s new online banks are planning to branch out into business lending and wealth management, seeking more lucrative avenues beyond basic savings accounts and transfer services, executives said.
Eight such banks have sprung up this year and by November they had taken more than $ 1 billion in deposits and attracted nearly 300,000 customers.
Whether these banks can take a significant part of Hong Kong mainstays such as HSBC and Standard Chartered and become profitable is closely watched in other Asian markets where regulators are also encouraging new challengers.
ZA Bank, managed by a unit of ZhongAn Online P&C Insurance Co Ltd, has set itself the goal of reaching breakeven point in five years. It aims to diversify beyond personal loans to lend to small and medium businesses next year, as larger loans are more profitable, and will also offer insurance and investment services to retail clients.
“I have four years left, and personal loans by themselves just won’t fly because the market is so big,” CEO Rockson Hsu told Reuters.
Mox Bank, whose backers include Standard Chartered and local telecommunications company PCCW, has announced plans to add credit card, personal loan and wealth management services by mid-2022.
“Hong Kong is still a very large market for wealth management offerings,” said Samir Subberwal, director of Mox and StanChart retail banking manager for Greater China and North Asia.
He added that the city’s current IPO boom, which has seen companies raise more than $ 50 billion this year, is likely to drive continued demand for investment advice and fees.
New banks are betting they can woo customers with more attractive interest rates on savings and loans – which they are able to offer in the absence of expensive branch networks – as well as with more user-friendly client applications and other benefits developed by their funders.
Livi Bank, which plans to offer personal loan and wealth management services next year, is one example.
Its mobile app was developed in part by shareholder JD Digits, JD.Com’s fintech unit in China, CEO David Sun said.
The bank has also become a partner of a loyalty program that will offer its customers cashbacks and points and which is operated by the distribution and restaurant chain Dairy Farm, a unit of the Jardine Matheson group, another shareholder of Livi.
Traditional banks have responded by cutting fees and investing heavily in upgrading and launching new digital platforms. HSBC has announced that it will spend $ 5.8 billion on technology globally this year, while this month Citi launched new digital-only banking services in Hong Kong.
In other markets such as Great Britain and Australia, new digital banks have been launched with mixed success. Australian bank Xinja said this month that as a result of the pandemic and after surveying the market, it would cease being a bank and return customers’ deposits.
In Asia, however, new banks tend to benefit from the backing of large companies, which improves their prospects. Singapore issued four digital banking licenses this month, and Malaysia is expected to accept applications next year.
Reporting by Alun John; Sumeet Chatterjee Supplementary Reports; Editing by Anshuman Daga and Edwina Gibbs