Hong Kong’s first digital bank offers 6 per cent rate to outdo HSBC in warning shot to new competition
- ZA Bank, the city’s first digital-only bank, is said to be offering the 6 per cent rate for three-month deposits capped at HK$200,000 for select clients
- Standard Chartered, HSBC and BOC Hong Kong pay 1.9 per cent to 2.3 per cent for the same deposit maturity
The first of Hong Kong’s new generation of digital banks has announced its arrival with a 6 per cent introductory rate for deposits.
ZA Bank Ltd, a unit of ZhongAn Technologies International Group, has begun a trial run that pays a select group of depositors over 3 percentage points more than banks such as HSBC Holdings and Standard Chartered. Though many doubt the new banks well be able to maintain such rates, the offer is a warning of upcoming competition for the city’s US$410 billion worth of local currency time-deposit business.
“This is more of a gimmick, which shouldn’t become a norm,” said Terry Siu, treasurer at CMB Wing Lung Bank Ltd., which pays 3.8 per cent to new savers for two-month Hong Kong dollar deposits. “But competition for funds is indeed getting higher as eight more banks are coming out.”
ZA began a pilot last month for the city’s first digital-only bank. It’s offering the 6 per cent rate for three-month Hong Kong dollar deposits capped at HK$200,000 (US$25,000), according to a person with knowledge of the matter. The accounts are set at a 2 per cent rate, but offer a top up of as much as 4 per cent to select clients, the person said. Standard Chartered, HSBC and BOC Hong Kong Holdings pay 1.9 per cent to 2.3 per cent for the same maturity.
The Hong Kong Monetary Authority handed licenses to groups including ZhongAn, Ant Financial and Tencent Holdings to operate virtual banks last year. The launch is now approaching at a time when tensions stoked by pro-democracy protests show few signs of abating.
Deposit rates could stay elevated as the unrest persists amid concerns over money outflows. So far there haven’t been any signs cash is fleeing the city, though banks have said some clients are inquiring about opening accounts elsewhere as a precaution. The HKMA, the de facto central bank, steers the economy and maintains stability by pegging the city’s dollar to its US counterpart.
The rates stand in stark contrast to parts of the developed world, where central banks have slashed key rates below zero, forcing banks in some cases to pass negative rates onto retail customers. In Denmark, where rates have been negative the longest, a bevy of banks now charge depositors.