What is the Game Plan for Hong Kong’s Virtual Banks?
In Hong Kong, virtual banking is bringing in new opportunities to serve the financially underserved, a segment new entrants including WeLab Bank, Airstar Bank and Mox by Standard Chartered, are actively pursuing.
Despite being a leading financial center, Hong Kong’s brick-and-mortar lenders are primarily focused on richer segments, leaving hundreds of thousands of customers up for grabs. These make up an estimated US$15 billion, or 30% of Hong Kong’s combined retail banking revenue.
In a webinar organised by Fintech News Hong Kong, we’ve invited the C-levels of Hong Kong’s virtual banks to discuss how this new breed of banks will reshape the financial future of Hong Kong and beyond.
We were joined by Adrian Tse, Chief Executive, WeLab Bank, Andrew Farmer, CIO, Mox Bank, Dr. Frederic Lau, CEO, Airstar Bank, and Frankie Wai, head of Business Solutions Group for Greater China at Temenos.
The webinar is supported and was made possible thanks to our sponsor Temenos, the company offers cloud-native, cloud-agnostic, API-first digital banking, core banking, payments, fund management, and wealth management software products and is relied on by 41 of the world’s top 50 banks, rely on Temenos to process the client interactions and daily transactions of more than 500 million banking customers.
Dr. Frederic Lau, CEO of Airstar Bank, the virtual bank developed by AMTD Group and smartphone giant Xiaomi, said his company is particularly eyeing small and medium-sized enterprises (SMEs), a segment largely neglected by the traditional banking industry.
“Traditional banks in Hong Kong really target rich people. Some banks are even closing branches in lesser wealthy areas. We have a lot of underserved customers in Hong Kong,” Lau said during the discussion last week. “SMEs need money but banks don’t want to lend to them. With virtual banking … and technology, … we can provide lending services to a larger [audience of retail] customers and SMEs … and at lower prices.”
Adrian Tse, CEO of WeLab Bank, said that because virtual banks do not have heavy fixed costs associated with running branches and labor, they are able to invest heavily on technology.
Using technology and digital platforms, virtual banks are able to provide their customers with apps and digital tools that allow them to manage their finances 24/7, conduct all kinds of transactions on their own, and access banking services on a self-service basis. These savings, he said, are transferred to customers in the form of cheaper products and services.
Adrian also challenged the notion that digital banking services are primarily geared at the younger demographic he shared that the oldest customer that signed up for their service is 83 years old.
Farmer, who prior to helping launch Mox, helped develop South Africa’s first digital bank TymeBank, said that for Mox, the team built the technology stack from the ground up. Mox “is entirely cloud-based,” he said, which provides the team with the needed speed and agility to create, test and deploy new products in a timely manner.
With Mox, he said, the focus is being put on providing customers with an exceptional digital-first user experience. This new virtual banking offering, he said, will complement Standard Chartered’s local banking business.
“We had the opportunity to build not only a new virtual bank, but also a new business architecture,” Farmer said. “We are bringing the best of both worlds: leveraging on Standard Chartered’s 160 years of banking experience in Hong Kong, all the while developing a new, amazing tech slack.”
For Temenos’s Wai, speed is a key challenge when working with virtual banks and fintechs. Temenos, has collaborated with some of the world’s biggest financial institutions on new digital banking offerings including Openbank in Spain by Santander Group, and O-Bank, formerly known as the Industrial Bank of Taiwan.
“Most virtual banks tend to go live within six to nine months,” Wai said. “Normally, for a typically banking project, it would take more than a year. How can we deliver [under] such a [short] timeframe? It’s a huge challenge.”
But it’s not just speed, he said, as working with new entrants, which can sometimes be telcos, tech startups, or e-wallet operators, requires a totally different way of thinking.
This rapidly changing banking landscape is not only requiring banks to change their approach to serving and connecting with customers, it’s also demanding software providers like Temenos to continuously evolve and adapt their solutions to the new trends that may arise.