Competition ends an unpopular bank fee

The impending arrival of virtual banks not only provides more choice for customers but is believed to have prompted at least one existing player to scrap its minimum balance charge

SCMP Editorial

Published: 12:12am, 23 Jun, 2019

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Many small depositors have long complained about being charged by banks because they have too little money in their account. The lack of competition in the industry means people have no choice but to put up with fees that eat into their meagre savings. The situation sits oddly with publicity presenting our banks as trustworthy and caring.

In a welcome change, HSBC is taking the lead to scrap a raft of fees, including the minimum balance charge. That means those with a passbook savings and other basic accounts with a balance of less than HK$5,000 will be spared the monthly charge of HK$50 starting from August 1. The current monthly charge of HK$120 for Advance accounts with deposit and trading volume below HK$200,000 will also be dropped. The banking giant said it was a step to reinforce its commitment to promoting financial inclusion and making banking easy for customers from all backgrounds. The Bank of China (Hong Kong) also said the service fees for personal integrated banking services and general banking accounts would be removed.

More banks are expected to follow. The change, analysts say, is fuelled by competition arising from virtual banks, which are due to come online later this year. Eight licences have been issued by the Hong Kong Monetary Authority since March. They include tech giants like Tencent and Alibaba, the parent company of the South China Morning Post as well as insurance company Ping An and smartphone maker Xiaomi. The virtual banks operate online without a branch network and are not allowed to charge minimum balance fees.

The fees have long been criticised as unreasonable, and for good reason. It makes no sense to charge the less affluent when HSBC is making huge profits. The virtual banks provide the way out for those who do not want their limited savings dried up by punitive fees.

With reduced overheads and staff counts, the new form of banking is in a better position to cater to less affluent customers and smaller companies. The virtual banks are expected to provide more attractive terms in order to win customers. The competition has not just prompted existing players to do away with unpopular practices and charges, it also provides customers with more choice.

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