Hong Kong’s internet banking pioneer says it will stay above the fray in city’s rush to embrace virtual banking
- The eight new licences are the largest number of new comers in a single year, and increase the local incorporate banks by one-third
- Citi decided not to apply virtual bank licence but have developed many popular digital bank services
Citigroup, which pioneered internet banking in 1998 in Hong Kong, said its Citibank retail banking unit will remain above the fray in the financial services industry’s rush to get virtual banking licenses in the city.
“We can offer all types of online banking services that a virtual bank can offer,” said Angel Ng Yin-yee, Citi’s Hong Kong and Macau chief executive, in an interview with South China Morning Post. “Plus, Citi can offer services at our branches that virtual banks cannot.”
The contrarian stance by the largest foreign lender in Hong Kong, employing 4,500 staff in the city, follows the announcement this week by the Hong Kong Monetary Authority (HKMA), which issued its second batch of four virtual banking licenses to ventures backed by a trio of China’s largest technology companies, and a unit of one of the biggest Chinese insurers.
The new licenses were awarded to Ping An Insurance’s subsidiary Ping An OneConnect, Ant Financial Services’ unit Ant SME Services, a Xiaomi-AMTD Group venture called Insight Fintech, and the Infinium consortium that includes Tencent Holdings, ICBC (Asia), and Hong Kong Exchanges and Clearing Limited (HKEX).
The first batch of licenses were issued in March and April to WeLab, and three ventures by Standard Chartered Bank, Bank of China (Hong Kong) and China’s first online insurer ZhongAn Online P&C Insurance. These permits restrict the licensees to operate their businesses purely online without physical branches.
Together, the eight virtual banking permits add to the 160 licensed banks that already operate in the city of 7 million residents.
Virtual banking, which began as early as 2014 in China, is all the rage on the mainland. Tencent, Xiaomi, search engine operator Baidu, e-commerce retailer JD.com and this newspaper’s parent company Alibaba Group Holding are all licensed to operate branchless banks.
China’s headways in e-commerce, financial technology and virtual banking are “wake-up calls” for traditional banks to innovate, Ng said.
“It is a wake-up call for traditional banks to invest more in digital capabilities to stay relevant in [meeting] the customers’ digital lifestyle,” Ng said. “We cannot stay there and do nothing.”
The bank’s innovations had included several firsts in Hong Kong: touch-screen teller machines in 1981, voice biometrics in 2016, and making its application programming interface (APIs) available for fintech developers in 2017.
Citibank teamed up with AAStocks.com in April to tie one of Hong Kong’s largest financial data providers to the bank’s online trading app, enabling bank customers to trade stocks through their smartphones. The tie-up bolstered Citi’s phone-broking transactions by 20 per cent last month, compared with a month earlier, she said.
“Customers are taking up these new fintech measures very quickly,” Ng said. “Again, we do not need a virtual bank licence to offer these services. There are virtual banks overseas but they mainly offer certain products or services, while very few offer full banking services.”
The bank is no stranger to digital services, having introduced internet banking in 1998, followed by mobile banking in 2008. Now 40 per cent of Citibank’s credit card applications are processed online, while 60 per cent of personal loans are done electronically. Up to 75 per cent of customers receive their payment statements electronically.
The New York-based Citibank, which operates 19 branches in Hong Kong, is not the sole financial institution to stay out of the rush to eschew “bricks-and-mortar” presence. HSBC, one of the city’s three currency printers which traces its roots to Hong Kong, also has stayed out of seeking a virtual banking licence.
Still, Bank of China (Hong Kong), Standard Charted and ICBC thought otherwise, teaming up with technology companies in ventures to apply for a virtual banking presence.
“Some of these banks want partners with access to new technology and customer base,” Ng said. “Citibank, however, believe we don’t need equity partners, but we believe an all-encompassing ecosystem would benefit clients.”
