Banking in the mobile era

August 19, 2019 10:25
Mobile banking is becoming popular not only among young people but also among the middle-aged groups, studies have found. Photo: Reuters

Today, smartphones are indispensable. The generation Z born after the millennium has grown up with Google, Facebook, WhatsApp and Spotify at their fingertips. They use mobile phones for chatting, playing games, making friends, listening to music, and even finding jobs and life partners. Thus, it is natural for them to use the devices to manage their money as well.

Surveys of global banking customers in the past 10 years have pointed to a clear trend. A Bain study conducted in 2011 on nearly 100,000 people in the United States, Canada, Mexico and Brazil revealed that the ones most satisfied with their banking service were those using mobile banking services. This group of people, however, was only fewer than 10 percent of the respondents at that time.

But the trend has intensified. In recent years, surveys by the consulting company have found that people in South Korea and mainland China, regardless of age (under 25 and over 55), rely heavily on mobile wallets – an average of 90 percent in South Korea, over 80 percent in the mainland, and 70 percent in Singapore and India, while young people in the United States, Canada, Japan, the United Kingdom, Germany, and Australia were also inclined to pay through mobile phones.

At the same time, more people are willing to choose technology giants when seeking banking services. Why? Because the financial services offered by technology titans such as Apple, Amazon and Paypal outperform conventional banks in five major areas: quality, time-saving, simplicity, reduced anxiety, and good investment for future generations.

This is especially true in "simplicity" where the top four service suppliers preferred are technology companies. Fifty-four percent of the 150,000 respondents from 29 countries were open to banking with technology companies, a trend especially pronounced in China, India and South America. Only respondents in Japan and Switzerland still have most trust in traditional banks.

What about Hong Kong?

As per the survey, Hong Kong people, not only the young (aged 18-34) but also the middle-aged (aged over 55) were willing to try banking with technology giants. Among the middle-aged people, over 60 percent welcomed these services.

So it is not surprising that many people are full of expectations for virtual banking services. The Hong Kong Monetary Authority approved eight licenses in May this year. To the general public, apart from increased options, they find that they need not to queue up for most of the banking services anymore.

We also expect that major service providers will pass on some benefits, in the form of higher deposit interest rates, to grab customers. The Economist has quoted a bank as saying that it costs less for a virtual bank to acquire new customers compared to what it does for a traditional bank - each new customer costs only US$8-10, while in the case of traditional banks the cost comes to US$60-70.

WeLab, a Hong Kong-based financial technology unicorn (a start-up with valuation of US$1 billion) has told the media that its revenue surged more than a dozen-fold over the past few years but its human resource expenditure only increased by less than two times because mobile phones became their branches. As virtual banks can save more costs, they have a lot of strength to compete.

For the time being, virtual banks will engage primarily in retail business in Hong Kong and they are expected not to impose any minimum account balance requirement or low-balance fees on their customers.

Smart City development is essentially the deployment of advanced technologies to provide convenient services to the public. Financial technology forms an important part. Fintech firms in Hong Kong can use the so-called global sandbox to develop cross-border testing of services and products to solve regulatory problems and expand in overseas markets. The potential of financial technology is huge, and Hong Kong should seize the business opportunity.

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Adjunct Professor, Department of Computer Science, Faculty of Engineering; Department of Geography, Faculty of Social Sciences; and Faculty of Architecture, The University of Hong Kong