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," said ZA Bank chief executive Rockson Hsu 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.
Singapore is set to award its first virtual bank licences in June, with 21 applicants vying for up to five licences - up to two for digital full banks and up to three for digital wholesale banks.
The full banks can provide a range of financial services as well as take deposits from retail customers while wholesale banks will serve small and medium-sized enterprises, as well as other non-retail sectors.
The seven applicants for the retail bank licences include Grab and its partner Singtel, gaming company Razer with Sheng Siong's founders, and Shopee owner Sea Limited.
Local tycoon Ron Sim's V3 Group, stored-value card maker EZ-Link and property giant Far East Organization have also teamed up for a bid.
The 14 contenders for the wholesale bank licences feature well-known Chinese tech and e-commerce firms such as billionaire Jack Ma's Ant Financial and TikTok owner ByteDance.
Analysts have said the opening up of Singapore's banking sector in this way is unlikely to threaten the dominance of DBS Bank, OCBC Bank and UOB.
This is because the regulator is committed to prevent "value-destructive" competition, while the incumbents have strong franchises and growing digital capabilities.
In Hong Kong, ZA Bank is rolling out its digital 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, said Mr Hsu, 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 are not 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 Bank of China (Hong Kong) all pay 1.9 per cent to 2.16 per cent over three months.
ZA, which is backed by ZhongAn Online P&C Insurance, a Chinese digital insurance company, has about HK$1.5 billion in registered capital. It has no plans to raise 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, 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 start-up," said CMB Wing Lung Bank treasurer Terry Siu by phone. "But there's still much room to further expand the business given the size of Hong Kong's banking industry."
BLOOMBERG
