Tandem, the UK challenger bank co-founded by fintech veteran Ricky Knox, is gearing up to expand into Hong Kong before the end of the year, as part of its international growth plans.
In an exclusive interview with EJ Insight, Ricky Knox shared his views on the Hong Kong market amid the often violent protests rocking the territory.
A challenger bank, or a virtual bank, is defined as a bank that primarily delivers retail banking services through the internet or other electronic channels instead of having physical branches.
Last year, the Hong Kong Monetary Authority, the city’s de-facto central bank, introduced virtual banking, allowing both financial and non-financial firms to operate a virtual bank in the territory, with an objective to promote financial inclusion.
Financial services firm Convoy (01019.HK), which applied for a virtual bank license last year, has announced a 15 million pound (US$19 million) investment in Tandem.
And though Convoy is not included in the first batch of companies that have received the license, Tandem aims to launch in Hong Kong this year.
“We are going to partner with an existing Stored Value Facility (SVF) license holder to bring our services to Hong Kong,” Knox told EJ Insight, although he declined to reveal the partner and elaborate on his company’s plans at the moment.
“We are discussing with partners what those options might be,” Knox said, adding that Tandem will apply for its own license “eventually”.
Tandem said it will roll out an early adopter program, Tandem Co-Founders, before the end of this year.
In the United Kingdom, over 11,000 “co-founders”, actually the bank’s first batch of customers, have worked with Tandem to help shape its product features and propositions.
In Hong Kong, the “co-founders” will receive a “special edition card” that will make them eligible to participate in a bonus rewards program.
It is unclear what regulatory approvals Tandem has obtained so far to operate in Hong Kong.
In May this year, the HKMA announced that eight virtual banking licenses have been awarded, a move that is expected to shake up the city’s financial sector.
However, the eight financial technology firms and consortiums are currently stuck in a “test mode” as far as their launch in Hong Kong is concerned, amid rising anti-Chinese sentiment and months-long protests in the territory, the Financial Times recently reported. Seven of the licensees are backed by Chinese companies, including Alibaba, Tencent (00700.HK), Xiaomi (01810.HK), and Bank of China.
Knox, however, remains unfazed by all the turmoil and believes it will not hinder Tandem’s launch in the city. In fact, he said he plans to live here.
“The protests are, at some level, unfortunate, and very disturbing for a lot of Hong Kong residents. What’s more disturbing for those Hong Kong residents doing the protests is, sort of, the integration with China,” said Knox.
“We are a UK bank, we will be coming into Hong Kong with transparency, and everything our heritage of where we’re from. I don’t think it’s a positive, but I don’t think it is a negative, either.”
“I don’t think it’s actually that much more negative,” he said. “Maybe, I’m completely wrong, but we will find out, see how that goes!”
Hong Kong consumers are often described as conservative and reluctant to embrace new tech applications, and this may explain why the territory is lagging behind in the adoption of mobile payments and e-commerce, compared with mainland China and other markets in the region.
However, Knox finds “some cool characteristics” in the local consumer population.
“We define a consumer segment as our target called the ‘NOW’ people, who are quite impulsive in making purchases sometimes, don’t spend a lot of their time with their finances. Actually, Hong Kong consumers are pretty aligned with our ‘NOW’ piece. About 60 percent of the Hong Kong population fits in our target demographics and falls in this behavioral segment.”
If Tandem’s launch in Hong Kong materializes, Knox expects the bank to amass “a few million customers” in the city.
Many of the banks in Hong Kong are notorious for their rigid and inefficient services. Even the HKMA has recognized that many newly established companies have complained about the difficulty of opening accounts with Hong Kong banks, especially for foreigners.
Knox believes the sentiment will pave the way for challenger banks to get a foothold in the profitable market, which is dominated by long-established banks such as HSBC (00005.HK).
“The real brand advantage of being a ‘new bank’ is the fact that people are fed up with the old ones, and I’m sure you will find the same thing here in Hong Kong,” he said.
“Do I want to pull out a 200-year bank card out of my wallet in front of my friends in the bar, or do I want to pull out some cool, funky new cards like the new Tandem card?”
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