Macroscope | As fintech makes inroads, Hong Kong’s bank branches need not go the way of the dodo – if they innovate and adapt

Branches should be inviting spaces where customers can consult advisers on more complicated banking matters and which make use of the latest technology to enhance their services

Reading Time:3 minutes

People queue for new banknotes for Lunar New Year “lai see” packets at the HSBC branch in Mong Kok on January 23. Photo: K.Y. Cheng

Published: 1:00pm, 1 May 2019Updated: 10:08pm, 1 May 2019

The rise of new technologies is challenging the traditional branch banking model. Digital banks, in particular, are posing a threat to how financial institutions have served their customers for well over a century. But new technologies also offer the bank branch a lifeline with the opportunity to transform customer experience.

Nowhere is this more pertinent than in Hong Kong, where branches have always been the main place where consumers go to bank. In a territory a little over 1,000 square km in size, there are over 1,300 bank branches serving a population of 7.4 million. To put that in perspective, in 2018, the whole of the UK had just over 7,500 branches for its population of 66 million.

This dominance could be about to change, however. Recently, the Hong Kong Monetary Authority (HKMA) granted its first three virtual banking licences heralding a new age of online-only banking. No longer will customers need to go to their local branch to pay bills, transfer money or take out financial products. Many have seen the convenience and flexibility this presents as the future of banking, even in Hong Kong.

All this could pose an existential threat to Hong Kong’s bank branch network. However, this needn’t be the case. In fact, banks shouldn’t see virtual banking as a threat, but more of an opportunity to transform their branch operations to suit the new digital age. Rather than be put out of business by new technologies, they can adopt them to provide a new type of banking experience.

Vincent Hui, general manager and head of personal banking at Bank of East Asia, at the bank’s “innovation centre” at BEA Tower in Kwun Tong, where customers can interact with the bank’s digital services, in May 2017. Photo: Dickson Lee

So what should the branch of the future look like?

First, banks should go back to basics and look at the physical space of the branch. Creating an inviting, open and welcoming space that looks more like a cafe will appeal to a demographic used to coffee shop culture. Customers can be greeted by staff with tablets powered by smart technology that can serve many of their immediate needs. At the same time, banks should create private spaces where more confidential conversations can take place – many customers still value the ability to have a conversation face to face with a trusted adviser.