Standard Chartered, the 162-year old lender, is ready to join the virtual banking race in Hong Kong with good prices and convenient services aimed at capturing the tech-savvy younger population, according to group chief executive Bill Winters.
The bank, which is based in London but generates much of its revenue in Asia, is one of eight firms that won virtual bank licences from the Hong Kong Monetary Authority (HKMA) last year and is expected to launch the new services in 2020.
It has introduced online-only banking services in eight African countries over the last 18 months, and has enhanced its digital banking services in Singapore and India.
Standard Chartered spent US$1.7 billion globally on its digitisation and IT costs last year, almost three times what it spent in 2015 when Winters first joined.
“We are very focused on developing digital services. The launch of our Hong Kong virtual bank will be a key strategy for our business,” Winters said in a group interview in Hong Kong last week.
Hong Kong’s first virtual lender, ZA Bank, which started operations in December, kicked off a price war last week by offering a 6.8 per cent interest rate on three-month time deposits for up to 2,000 customers, much higher than traditional lenders’ 2 to 3 per cent for large deposits.
WeLab Virtual Bank, which will start operating later this year, also plans to compete on price at launch, according to group founder Simon Loong.
HKMA deputy chief executive Arthur Yuen said on Friday that with the other seven virtual banks due to roll out their services this year, there will be strong competition in the sector from the outset.
Winters said his team is ready to join the fray.
“Our team has been testing some good, innovative products with a small group of customers. We will offer an attractive package which is not purely based on pricing but also exceptional convenient services for customers,” he said.
“We have introduced eight digital banks in Africa in the last 18 months. The number of new customers we have in Africa over the past 12 months is more than what we had in the prior 12 years.”
Standard Chartered introduced its first virtual bank in Ivory Coast in mid 2018, which attracted 18,000 new account openings in its first year. It expanded its online-only bank to seven other African countries: Uganda, Tanzania, Kenya, Ghana, Botswana, Zambia and Zimbabwe.
Winters said quick account opening and convenient services were key to the success of its virtual banks in Africa.
“Our mission is to allow customers to have all bank transactions done via a mobile phone app with no need to go to a branch or to make a phone call,” he said.
He admitted, however, that it will be different in Hong Kong, a city with 160 banks serving a population of 7.5 million.
“In Africa, many people did not have a bank account, while in Hong Kong, almost everybody has a bank account already,” said Winters.
The lender’s virtual bank is a joint venture in which Standard Chartered has 65.1 per cent ownership. Telecom company HKT owns 15 per cent, internet operator PCCW has a 10 per cent stake, while mainland Chinese online travel firm Ctrip Finance owns 9.9 per cent.
He said the benefit of having a brand new virtual bank is having new partners and the ability to offer a completely new business model.
But he believes the existing branch network of Standard Chartered remains important, complementing the new virtual bank services.
“Brick-and-click is a good business model. Our branch network gives confidence to people as they continue to serve customers who never want to pick up a mobile phone app to do their banking,” he said.
“Our virtual bank can help expand our market share of the younger generation.”
Standard Chartered has three times more market share among older clients than those in their 20s and 30s. He hopes the launch of the virtual bank will bring in younger customers, as happened in its African markets.
While seven months of often violent anti-government protests in Hong Kong have hurt some retail and tourism clients, Winters said the bank will not change its strategy in the city.
“[We] will not change our view on Hong Kong, which remains our regional hub, acting as a gateway to mainland China,” he said. “These have been very difficult times during the past six months. But I am confident in Hong Kong, whose fundamentals are still resilient.
“Hong Kong’s capital markets – including IPOs, equities trading and debts, remain very active. It remains a regional financial hub.”
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