Corrected: UPDATE 4-HK heralds online banking era with StanChart JV, two others as new entrants

HKT Trust and HKT

27/03/2019 10:26

(Corrects second and 18th paragraphs to clarify ZhongAn
International shareholding)
    * StanChart joint venture includes PCCW, HKT, Ctrip
Financial
    * ZhongAn and BOC Hong Kong-led JV also win licences
    * HKMA says virtual banks will promote financial inclusion 
    * Five more licences will be issued soon, says HKMA  

    By Alun John and Sumeet Chatterjee
    HONG KONG, March 28 (Reuters) - Hong Kong has issued
online-only banking licences to three groups, including joint
ventures (JVs) of Standard Chartered and BOC Hong Kong, in what
could be the biggest shake-up in years in the city's retail
banking sector dominated by old-guard lenders.
    Besides StanChart  STAN.L  and BOC Hong Kong  2388.HK  JVs,
the Hong Kong Monetary Authority (HKMA) also issued the
so-called virtual banking licence to a subsidiary of ZhongAn
Technologies International Group, the international arm of
Chinese online insurer ZhongAn Online P&C Insurance  6060.HK .
    The licence will give holders access to a lucrative retail
banking market in the Asian financial hub, where many consumers
are unhappy with the current options.
    According to research from Accenture, 43 percent of people
living in Hong Kong have a positive experience when visiting
their bank branch versus a global average of 57 percent.
    "The biggest goal for this year is a super smooth user
experience for core banking services, making sure that it is
highly secure, and that our users know that. That's easy to say,
but not easy to do," ZhongAn International President Wayne Xu
told Reuters in an interview. 
    But "the path to profitability is very viable," Xu added.
    Core offerings would include loans, deposits and transfers,
Xu said, and the ZhongAn venture would primarily target three
segments of users: a new generation of customers who are fluent
in doing everything on a digital device, small- and medium-sized
enterprises, and start ups.
    However, the entrenched position in Hong Kong of established
banks, such as HSBC  HSBA.L , StanChart and a slew of Chinese
banks, is expected to be a major challenge for the online-only
licence holders.  urn:newsml:reuters.com:*:nL3N1VL3VL
    HSBC, for example, made nearly $6 billion from its Hong Kong
retail banking and wealth management operations last year, a
third of total group profits and compared with $476 million in
Britain, its second most profitable retail banking market.
    "It's definitely a positive for the Hong Kong market, but
the virtual banks have a long way to go," said Hoi Tak Leung, a
senior technology sector lawyer at Ashurst. 
    "There's going to be some fierce competition with each
other, and with the incumbents, and it is unlikely all will be
successful."
    The newly licensed virtual banks plan to launch services in 
six to nine months, HKMA's deputy chief executive, Arthur Yuen,
said, adding the regulator would process five more applications
"as expeditiously as possible".
    Some 33 virtual banking applications were submitted by the
deadline of Aug. 31 last year, and the HKMA short-listed eight.
    
    DIGITAL STRATEGY
    Besides individuals, small firms, which have long complained
 of difficulties in opening bank accounts in Hong Kong, will
also be targeted by the new online lenders, with small loans,
foreign exchange and payment services among those on offer.    
    StanChart will own 65.1 percent of SC Digital Solutions Ltd
JV, with the rest owned by Ctrip Financial, a unit of travel
firm Ctrip.com  CTRP.O , as well as Hong Kong-based telecoms
groups PCCW Ltd  0008.HK  and its unit HKT Trust and HKT Ltd
 6823.HK .
    BOC Hong Kong, a unit of Bank of China  601988.SS , will own
44 percent in the Livi VB Ltd JV, while JD Digits, a financial
affiliate of Chinese e-commerce firm JD.com  JD.O , will hold 36
percent and retail and property group Jardines 20 percent.
    ZhongAn International is a joint venture founded in 2017
between a subsidiary of ZhongAn Online and realtor Sinolink
Group  1168.HK . 
    ZhongAn Insurance's executive chairman, Ou Yaping, sits on
Sinolink's board and holds a 45 percent stake in the company,
according to Refinitiv data. 
    Xu said ZhongAn, China's first online insurer, would bring
its technology platform and experience of operating online
financial services. Sinolink will "will provide local access,
capital and a lot of local knowledge", he added.  
    StanChart, which makes the bulk of its revenue in Asia, has
made investing in digital technology to accelerate growth in
retail banking a key part of its new strategy.  urn:newsml:reuters.com:*:nL3N21D0OK   

 (Reporting by Alun John, Sumeet Chatterjee and Holly Chik;
Editing by Himani Sarkar and Stephen Coates)
 ((Alun.John@thomsonreuters.com; +852-28415827;))