What do Airstar Bank, Ant Bank, Livi Bank, Fusion Bank, Mox Bank, Ping An OneConnect Bank, WeLab Bank, ZA Bank have in common? They are all licensed in Hong Kong to offer virtual banking services, joining the 194 authorised banking institutions.
You have to ask: is there room for all these virtual banks in a market that is just 7.5 million in size? Sure, the city has a relatively healthy average gross savings rate of 28.9% (though lower than the all-time high of 37.6% in Sept 2006) but way lower than China’s 44.6% or Singapore’s 46.1% (To be fair, Hong Kong’s GSR in Sept 2020 was 29.9%. But who is counting?).
A survey by Field Resources Consultant suggests that said eight virtual banks are gaining traction in the local market with user growth rate, strong public awareness, and a willingness among consumers to open an account in the near-term. To prove its point, the survey noted that in August 2020, only 4% of respondents had virtual bank account. This grew to 7% by December 2020.
The survey, entitled “Reimagine: Virtual Bank and Virtual Insurance,” revealed an optimistic view of uptake among Hong Kong consumers with 51% of respondents claiming an interest in virtual banking, and 73% showing willingness to open an account within the next six months.
The survey estimates that average savings that respondents’ willing to place at virtual banks is HK$106,850, suggesting a potential market size of HK$152 billion.
Attraction to use virtual banking
Among respondents interested in virtual banking, 49% of those aged 18-30 and 38% of those aged 31-40 cited convenience as the primary reason to consider using virtual banking.
Around half of them consider virtual banking to offer a better payment gateway or E-Wallet than traditional banks for transfers and online payments for government bills and online shopping.
Besides expecting a seamless banking experience across all devices that’s personal and flexible, respondents said that virtual banks should offer higher interest rates on savings (85%), lower service fees (75%) and an 24/7 service (66%).
Awareness remains an issue: 84% had heard of virtual banks, but only 12% knew about their actual services.
A third of the respondents expressed concern about the ease of access to customer service representatives.
Of those interested in virtual banking services, 86% would like to contact customer service through instant messaging, compared to 62% by phone, showing that users do not need to visit a physical branch if they have easy access to a customer service representative and enjoy full financial services.
There remain opportunities for which virtual banking may present new opportunities:
- Online payments, for shopping online, paying bills etc
- Taking fixed deposits. Interestingly, many respondents need their online payments for over types of service.
Walter Chan, managing director and head of User Research of Field Resources Consultant, pointed to the survey as suggesting existing payment functions of virtual banks as insufficient to satisfy the consumers’ needs.
“The development of diversified strategies, such as FPS (Faster Payment System) supported or issuing VISA or MASTERCARD debit cards, would help the overall development,” he elaborated.
It is worth mentioning that in the latest round of survey conducted in December, 71% of the respondents agreed that since the government does not have a third round of Employment Support Scheme, it would help SMEs tide over the difficult times if virtual banks could provide more flexible assessment of loans approval to SMEs.