Hong Kong’s first digital bank offers 6.8% for deposits but says not eyeing price war
HONG KONG – The first of Hong Kong’s new generation of virtual banks has no plans to start a broader price war even as customers flocked to its introductory deposit rate of almost 7 per cent.
ZA Bank, one of eight firms preparing to start digital-only banks in Hong Kong, saw interest from almost 20,000 people as it kicked off offering deposit rates four percentage points higher than established firms such as HSBC Holdings. It will accept about 2,000 people as initial customers, with 100 getting the highest three-month rate as a one-time deal. Ahead, it will overall pay rates in line with the market.
“This is a reasonable deposit rate level for new funds as we’ve run the numbers,” Rockson Hsu, chief executive officer of ZA Bank, said in an interview. “Our aim isn’t to start the business with disruptive pricing.”
The initial offer is also capped at HK$100,000 (S$17,900), but will nevertheless be a welcome balm for the lucky few in a city reeling from the coronavirus crisis where many businesses are already struggling after almost 10 months of pro-democracy protests.
The digital-only bank is rolling out its services at a time when about 30 per cent of the city’s bank branches have shut to limit the spread of virus and traditional lenders are stepping in with relief measures by cutting fees and extending loan periods to both businesses and consumers.
ZA’s roughly 200 employees are all working from home on their notebook computers, Mr Hsu said, and customers won’t notice a difference.
“None of our products or services have been suspended,” he said. “Our clients’ mobile phone acts like a branch.”
Virtual banks mimic traditional ones in that they will accept deposits and give out loans, but aren’t expected to set up physical branches. ZA provides users with a “full suite of services 24/7,” allowing customers to open an account in five minutes by using a Hong Kong identity card.
Stepping away from its 6.8 per cent teaser rate, ZA offers more moderate pricing on its website for potential customers, ranging from 1.4 per cent on one-month Hong Kong dollar deposits to 2 per cent for 12 months. Standard Chartered, HSBC and BOC Hong Kong Holdings all pay 1.9 per cent to 2.16 per cent over three months.
ZA, which is backed by ZhongAn Online P&C Insurance Co, a Chinese digital insurance company, has about HK$1.5 billion in registered capital. It has no plans to raise to more capital for now, according to Mr Hsu.
Other companies poised to pile into Hong Kong’s digital banking market are ventures backed by Chinese giants such as Ant Financial and Tencent Holdings Ltd, so it remains to be seen what type of measures they take in the upcoming drive for the city’s US$413 billion local currency time-deposit business.
“I’d say the response is quite good for a startup,” Terry Siu, treasurer at CMB Wing Lung Bank, said by phone. “But there’s still much room to further expand the business given the size of Hong Kong’s banking industry.”