How to improve your chances of getting a loan in Hong Kong: ditch that old phone and use lower case letters
Banking in Hong Kong will soon become easier, as most major banks compete to roll out a simpler process for approving small loans online, part of the city’s push to streamline banking to serve customers better and compete with fintech companies.
Under the Hong Kong Monetary Authority’s guidelines issued in May, lenders no longer require proof of address, or evidence of income, to qualify for small loans. This has changed how people apply for bank loans.
The new rules have been embraced by every major lender in Hong Kong, as they accept fintech as a better way to improve the efficiency of their customer service. Citibank, Standard Chartered Bank and Bank of China (Hong Kong) responded by waiving proof-of-income for existing customers, while HSBC and its Hang Seng unit said they too will follow suit.
Citibank looks at customers’ credit history, including the number of credit cards they own, plus their payment record via TransUnion, a private credit reference agency that collects credit history data from banks.
“Every time someone applies for a new credit card or a new loan, it triggers an inquiry to the credit bureau. If one person triggers too many inquiries in a short time, he or she can be considered a higher-risk customer, and receive a lower credit score,” said Citibank’s head of customer franchise and head of digital banking Priscilla Ng. “This may lead to higher rates for loans, or the application could be declined altogether.”
Customers who are attracted by welcome gifts and end up with multiple credit cards need to handle their payment records carefully, as any late payment would result in low credit scores, which will hurt their prospects of landing a loan, Ng said.
To be sure, “confidence lending” - augmented by big data analysis and complex probability assessments - have been par for the course for fintech companies for years, long before the HKMA’s guidelines.
WeLab Hong Kong, which is in the process of seeking a virtual banking license from the HKMA, is one such company.
“We use data points such as the age, career, or the mobile phone model of borrowers to analyse their behaviour and estimate their income,” said the company’s general manager Tat Lee. “Someone who uses a very outdated or cheap phone probably doesn’t belong in a high-income group.”
Some career choices rank higher on credit scores, giving civil servants, teachers and professional occupations higher chances of landing a loan, Lee said. Even the time and the way application forms are filled can be taken into consideration, he said.
“Customers who apply at midnight are in urgent need of money,” Lee said. “An applicant who fills in the form in capital letters may not pay much attention to details.”
Even Hang Seng Bank, the 85-year-old lender owned by HSBC, is embracing big data analysis, as it prepares to waive proof-of-income for loans to existing customers with good credit history starting from the fourth quarter, said Margaret Kwan Wing-han, the bank's executive director, and retail banking head.
HSBC reviews its personal loan application procedure from time to time and will proactively consider adopting the waiver of income proof, a spokeswoman said.
Subsequent to the issuance of guidelines on credit risk management for personal lending business by the HKMA, Standard Chartered Hong Kong has implemented a waiver for traditional income and proof of address for existing customers to apply for personal loans online, a spokeswoman said.