Exclusive | Standard Chartered-backed virtual bank Mox wants to double its customer base in 2021, CEO says
- Mox is the second branchless lender to pass 100,000 customers mark
- Hong Kong’s e-commerce market is projected to balloon from US$21 billion last year to US$29 billion in 2024
The lender is the second branchless bank to pass the 100,000 threshold – a milestone that it achieved on Saturday – after ZA Bank declared it had reached 300,000 customers last month, in its first year of operations. WeLab Bank, another such lender, expects to reach the 100,000 mark by June, according to its CEO, Tat Lee. The trio account for 86 per cent of the total 580,000 customers among the eight virtual banks in the city, based on regulatory data.
Guven said he was encouraged by the sign-up rate and the amount of money clients were keeping in their accounts – about HK$60,000 (US$7,730) on average. This is 15 times higher than holders at digital-only banks in Britain, who maintained an average account balance of £350 (US$209) in the first half of 2019, according to a September 2019 report by Accenture Strategy.
The eight virtual banks, which are a major part of a fintech push by the Hong Kong Monetary Authority (HKMA) in recent years, had already secured a combined HK$20 billion in deposits as of March, with most operating only for a few months. This shows the new generation of banks can compete with the 155 traditional lenders that serve the city’s 7.5 million people.
“When I compare this number with some challenger banks, even some traditional banks, in the UK or Germany or Spain or the US, you cannot see this type of balance,” Guven said in an interview with the Post. “This number is tremendous. It brings us a lot of opportunities, where we can create value for these customers. This is why Hong Kong is unique.”
Its secret weapon will be further integration with services provided by its other backers – telecoms giant HKT, internet firm PCCW and mainland China travel firm Trip.com – Guven said. The bank already offers an easy switch to its credit card for online payments at its partner companies.
“Our JV partnership is going to be one of the biggest differentiators” from traditional banks, Guven added. “In the next six to nine months, we will bring these types of [seamless] services to the market.”
Mox’s expansion plans follow a rapid growth in the number of online shoppers in Hong Kong. The city’s e-commerce market is projected to balloon from US$21 billion last year to US$29 billion in 2024, according to the 2021 Global Payments Report by Worldpay from FIS Global, which is a Florida-based payment solutions provider.
This is the result of the HKMA’s promotion of e-payments and digital banking in recent years, while the pandemic last year also helped e-commerce and virtual lenders grow, as people were forced to work from home.
Hong Kong was tied with Singapore in 12th place globally in terms of fintech adoption rates in 2019, according to the Global FinTech Adoption Index compiled by consulting firm EY. Hong Kong’s adoption rate increased from 32 per cent in 2017 to 67 per cent in 2019, ranking it above the US, Japan, France and Germany, but behind Britain, India and mainland China.
Mox has customers as old as 90 years old, but most of its customers were “emerging affluents” between the ages of 28 and 40 years old, Guven said.
Hong Kong’s virtual banks may generate revenues of up to HK$76 billion a year by 2025, capturing a combined market share of 19.3 per cent, according to Benjamin Quinlan, chairman of the FinTech Association of Hong Kong and CEO of consulting firm Quinlan & Associates.
“Hong Kong’s gross saving rate is 25.5 per cent, which is higher than that in Britain at 15 per cent. This savings culture explains why Hong Kong’s virtual banks can attract a higher amount of deposits from their customers than the challenger banks in the UK,” Quinlan said.
The virtual banks may face challenges when it comes to keeping up such a torrid pace, as they are paying notably higher interest rates and cash rewards to attract customers, he added. Quinlan, however, said they could still be profitable, given their lower operating costs per customer and ability to better monetise customer data.
To attract customers, Mox is offering no-fee credit cards, cashback on purchases and a competitive interest rate, but not as high as some of its rivals.
Its low-cost model – it has one employee for every 550 customers – combined with a greater number of lending and fee-based products, will allow it to reach profitability, Guven said. The employee-to-customer ratio is expected to reach 1,000 later this year, he said.
“For Hong Kong, especially virtual banks, a few of them will be profitable in three years’ time. I believe Mox will be one of them,” Guven said.
