Banks are closing branches all over the world, but why not in Hong Kong?
Slow move to digital banking in the city is one factor contributing to more branches staying open
Retail banking in Hong Kong seems resilient if you look at the number of outlets. Elsewhere in the world, bank branches have been closing; in Hong Kong, by and large, they have stayed open.
HSBC will have halved its UK presence compared to 2011 by the end of this year, but a spokesman for the bank said in January that there was no programme of branch closures in Hong Kong.
Meanwhile, earlier this month, Citi announced that it would close 80 per cent of its branches in Korea, a move that has not been replicated in Hong Kong to anywhere near the same extent. In both cases the move towards digitisation was given as a reason.
The slower take up of digital services by Hong Kong residents is at least part of the reason why there have not been similar closures in Hong Kong.
“While we see that a growing number of basic transactions like payments are shifting to online and mobile channels, our customers continue to use branches for wealth management and mortgage services which need more personalised support,” said Greg Hingston, HSBC’s head of retail banking and wealth management Hong Kong.
“Also there are still segments of the population that don’t use digital banking and ... we continue to invest in outlets to serve these customers.” This has had positive consequences for employment in Hong Kong.
“In the Netherlands, ING laid off 1,000 staff as they moved to more digital operations. Because there has not been the same take up of digital in Hong Kong, we have not seen any significant decline in branch headcount,” said Maggie Li, associate director of banking and financial services at Randstad Hong Kong.
“In fact at the moment in Hong Kong digitisation means that banks are hiring more staff as they adjust to the changes.”
However, there are reasons for branches remaining open in Hong Kong above the digital dimension.
“In Hong Kong it is also important to note that the degree of customer account concentration per branch is very high and our network is very productive, unlike other markets where [it] is much lower,” said Hingston.
Hong Kong’s sky high housing prices are a factor in this too.
“Mortgages in Hong Kong are much larger than mortgages elsewhere, and if a bank were to close branches, losing a small fraction of this business would still be a significant sum,” said Keith Pogson, senior partner for financial services at EY.
Branch closures have been seen in less profitable areas, and last year, BEA closed all 22 branches of its East Asia Securities outlets.
Customer behaviour is also playing a role.
“In Hong Kong when customers are choosing a bank, the convenience of its location – usually how close it is to their place of work rather than where they live – is an important aspect, and so that is another reason why branches are staying open,” said Pogson.
Hong Kong’s banking regulator is also keen for banks to maintain a physical presence.
“The HKMA attaches great importance to the accessibility of basic banking services to the general public, and has been encouraging the banking industry to put the spirit of financial inclusion into practice when developing their banking networks,” a HKMA spokeswoman said.
The spokeswoman added that there were even plans afoot for more bank branches to open. “Three note-issuing banks and five retail banks plan to open about 10 branches and deploy one mobile branch in the next 12 months or so to provide basic banking services for the residents in remote areas and public housing estates,” she said.
Nonetheless, bank branches in Hong Kong are starting to change.
“Branches are becoming more about selling additional services to clients, and not just offering transactions,” said Pogson.
“This means that there has been some change in the people employed in branches, as banks look to raise branch staff’s capabilities to offer more.”
There are also now indications that banks are starting to adapt their offerings, and a number are exploring wholly digital branches.
Other adaptations may even involve some closures or “rationalisations”.
“Going forward, Bank of China Hong Kong will continue to explore the feasibility of using innovative forms of banking service delivery channels and to rationalise its branch network to provide customers with banking convenience beyond conventional branch services,” said a spokeswoman for the bank.
As Hong Kong consumers gradually become more willing to use technology, and technology provided by the banks improves, then the pace of such changes may accelerate.