In the past three years, eight virtual banks have started operations in Hong Kong and have achieved early results in customer acquisition. Some of these results were also echoed in Forrester’s survey data from the past year: 44% of Hong Kongers opened a virtual bank account in the first six months in 2021, for example. Better digital experience and convenience rank as the top reasons for opening a virtual bank account. Forrester has recently published a series of case studies covering the strategy and vision, technology and operations, and customer experience (CX) of livi bank, ZA Bank, WeLab Bank and Ping An OneConnect Bank.
Strategy And Vision
- Ping An OneConnect Bank (PAOB) is pioneering data sharing and partnerships. Real-time data plays a key role in transforming small- and medium-size business (SMB) lending experiences. Putting open banking at the heart of its strategy, PAOB took an active role in the Commercial Data Interchange’s proof-of-concept exercise, part of the Hong Kong Monetary Authority’s Fintech 2025 strategy to enable the exchange of financial data between financial and nonfinancial institutions. Working with third parties improves PAOB’s access to SMB operating data and enables it to better evaluate SMBs’ operational performance and serve their financial needs.
Technology And Operations
- ZA Bank is using digital technology to improve operational efficiency. ZA Bank uses Microsoft Teams instead of email for internal communication; this accelerates information dissemination, lowers response times, boosts interaction, and increases transparency, which is especially effective for remote working. The bank’s data-driven dashboard shortens operating processes, makes data insights more visible, and enables staff to make informed decisions. ZA also uses technologies such as robotic process automation and AI to reduce manual operations within the bank, such as internal paperwork and manual reconciliation.
- livi bank embraced a customer-led, evidence-based approach to digital strategy. Traditional banking services in Hong Kong still often involve arduous, fragmented paper-based processes across customer journeys. This creates an opportunity for digital banks like livi to change the digital customer experience game. The bank collects customer feedback from multiple sources (app usage, customer service, and focus groups) and acts quickly on the feedback to iterate its digital experience. livi has used customer feedback to fine-tune the user interface and user experience of PayLater, its new “buy now, pay later” (BNPL) product, to speed up the application process and improve the clarity of repayment schedules. The bank has staffed its product teams with talent from a variety of nonbanking industries such as retail and hospitality, who can apply their diverse expertise to designing great digital lifestyle CX.
We found that many virtual banks have put the Chinese Greater Bay Area (GBA) market into their future expansion plan, and wealth management has become a new competition frontier for them. As livi bank puts it: “Programs like ‘Wealth Management Connect’ will boost cross-border wealth management in the region, and Hong Kong-based banks can leverage their rich experience in global and cross-border asset management to serve the increasing demand for cross-border financial products by mainland Chinese customers in GBA.”
We believe banks within GBA will compete intensively to capture wealth management opportunities. Forrester also recently published a report, Understanding Investors In China’s Greater Bay Area, to identify different investor segments based on attitudes and behaviors in the GBA region. Banks can read this report to understand customers’ wealth management behavioral differences across Hong Kong and the Guangdong province.
Though many virtual banks in Hong Kong have had some success in terms of customer acquisition, they will face challenging retention issues going forward. For instance, our latest data shows that 51% of Hong Kong consumers said they will go back to their old bank if the virtual bank stops offering a higher deposit interest rate. The race to win, serve, and retain digital banking customers has begun, and the competition is intense! Only the most customer-obsessed banks will win.
Forrester clients can read the four case study reports:
You can also schedule an inquiry to discuss with us.