Virtual banks will disrupt Hong Kong’s incumbents
It’s the combination of several initiatives that differentiates Hong Kong’s introduction of open banking from that seen in other markets. In particular, the entrance of new “virtual” banks – including well-capitalized multi-party joint ventures – is likely to bring the disruptive innovation the industry has long needed.
In addition to local market opportunities, newcomers are expected to look beyond the territory’s borders – leveraging Hong Kong’s status as a highly credible regulatory market to help launch innovative propositions with regional or even global ambitions.
The ability of these banks to leverage Open APIs and faster payments servies will allow them to create a powerful digital offering for Hong Kong consumers, who appear increasingly envious of the more innovative financial solutions available in Mainland China. It’s likely that these new online-only banks will use open banking-inspired services to build extended ecosystems beyond the financial sector, integrating other parts of a consumer’s digital life – such as retail, transportation, travel, and telecommunications.
For traditional banks, Open APIs also bring new opportunities – as well as a significant program of work. Incumbents have begun to upgrade legacy technology systems, deploy more digital tools and adopt a more competitive mindset, but progress is often slow and timelines can be tight.
Huge consumer adoption potential
Consumers are to be the big winners as Hong Kong’s banking sector opens up and signs are strong that they will take full advantage of the changes.
Compared to other markets, Hong Kong consumers are not active mobile banking users, however, they show huge adoption potential. They are some of the world’s most digitally-active banking customers, with 98% owning a smartphone and 78% using social media. Consumers in Hong Kong ranked third (after mainland China and the US), for their propensity to share transaction data with FinTechs in return for better services.