ZhongAn, StanChart-backed lenders take early lead in HK digital bank race

Boc Hong Kong Holdings

04/05/2021 09:27

By Alun John
    HONG KONG, May 4 (Reuters) - Online-only banks in Hong Kong
backed by China's ZhongAn Online P&C Insurance  6060.HK  and
Britain's Standard Chartered  STAN.L  moved ahead of newly
launched rivals as they garnered 70% of deposits last year, the
lenders' annual reports showed.
    The numbers give the first glimpses of the performances of
Hong Kong's eight so-called virtual banks, which launched last
year and could offer lessons to peers in Asia, with Singapore's
digital banks set to kick off operations next year and Malaysia
set to follow. 
    The eight banks had total customer deposits of HK$15.8
billion ($2.03 billion) at the end of 2020, their annual reports
showed. Of this, ZA Bank, operated by a unit of ZhongAn, and
StanChart-backed Mox Bank had deposits of HK$6.04 billion and
HK$5.2 billion, respectively, at year-end.
    Deposits are key for the online-only banks as they are a
source of cheap funding and their primary route for
brand-building.
    The lenders which began operating between March and
December, are seeking to win business with improved user
experience, technology and promotional rates.
    "Mox and ZA have done a good job of engaging with customers
and building a brand, whereas some of the other banks' websites
or app store ratings are a bit underwhelming," said Ben Quinlan
CEO of financial services consultancy Quinlan & Associates.
    Up to HK$76 billion worth of revenue could be up for grabs
for virtual banks by 2025, Quinlan & Associates has estimated.
    Other Hong Kong virtual banks are backed by Tencent
 0700.HK , Xiaomi  1810.HK  and Ant Group. Zhong An was the
first among the eight virtual lenders to launch, while Mox was
in the middle of the pack.
    Still analysts say digital banks are unlikely to make a
large dent on high street behemoth HSBC  HSBA.L  as well as Bank
of China Hong Kong  2388.HK  and Standard Chartered, which are
also cutting fees and boosting their digital services.
    All eight banks posted losses last year, as expected, as
they focused on setting up operations, building brands and
attracting deposits, the annual reports showed. The banks are
starting to move into revenue generating segments such as
business lending and wealth management, senior executives have
said.  urn:newsml:reuters.com:*:nL1N2J406H
    "Getting a large deposit base quickly can be a good
indicator of more efficient onboarding and how consumers
perceive early products, services, the overall user experience,"
said Andrew Gilder, who leads EY's Asia-Pacific banking and
capital markets practice.
    "It'll be important for their longer term viability also
that they roll out new products such as loans and credit cards
to make the most of these customer numbers and drive
profitability."
($1 = 7.7665 Hong Kong dollars)

 (Reporting by Alun John; Editing by Anshuman Daga and
Muralikumar Anantharaman)