Can Hong Kong’s virtual banks keep up the pace?
The landscape of virtual banking in Hong Kong has undergone significant changes since the first virtual banking licence was issued in 2018. Eight virtual banks with digital-first strategies have been launched since then, promising innovative and cost-effective services.
However, despite the initial excitement that led to rapid customer acquisition, these virtual banks’ long-term impact and sustainability remain in question. While they have successfully attracted over two million customers, many of these accounts are dormant, and the average deposit amount has halved from about HKD 30,000 to HKD 15,000.
With concerns about the future viability of virtual banks and their ability to maintain growth and customer engagement over time, virtual banks must adapt and transform for sustained success.
Top five ways for virtual banks to achieve sustained growth
To transition smoothly from rapid customer acquisition to sustainable growth, virtual banks should focus on these five key strategies:
Deepen customer relationships: Virtual banks need to go beyond mere customer acquisition and focus on customer retention by turning these initial acquisitions into active, engaged accounts. Implementing strategies that increase deposit stickiness and encourage account usage is essential for long-term success and customer loyalty.
Develop compelling propositions: To stand out from traditional banks, virtual banks must create tailored products and services that meet specific customer needs. Offering clear advantages and unique value propositions will help differentiate them in a competitive market.
Focus on SME services: By addressing gaps in SME banking, such as streamlining account setup and reducing paperwork, virtual banks can become invaluable partners for entrepreneurs and small businesses. Providing streamlined and efficient services will attract and retain SME clients.
Leverage algo-based lending: Utilising algorithm-based lending solutions that use data integration for real-time credit approvals can greatly enhance efficiency. This approach not only speeds up the lending process but also improves access to financing for businesses, making virtual banks more attractive to borrowers, especially SMEs.
Deliver frictionless banking: Embracing the concept of invisible banking, where financial services are seamlessly integrated into everyday digital interactions, can offer customers a smooth and intuitive user experience. This drives higher engagement and satisfaction.
Virtual banking in Hong Kong has made significant strides, but there is still much work needed to achieve its full potential. By focusing on the above strategies, virtual banks can overcome current challenges and pave the way for a more innovative and inclusive banking future. The journey ahead may be complex, but the opportunities for growth and transformation are immense.
To discuss more on the topic of virtual banking in the Hong Kong landscape, feel free to reach out to the expert, Ben Quinlan, CEO & Managing Partner at Quinlan & Associates, at bquinlan@quinlanandassociates.com.
Special thanks to Ben for his valuable insights during our podcast episode. For a more in-depth discussion, listen to the full episode here:
What's next?
Next week, we’ll dive into the future of SME banking in Hong Kong . Stay tuned for more industry-leading insights, straight from our experts to your inbox every Friday.