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Economy· Business· Finance

Upcoming HK’s new digital bank offers 6% rate for deposits, selected savers only

CKN
minutes 2020/01/13 09:40:42
3,194
Digital Banking, Business, Fintech, ZA Bank

Jan 13, 2020 (China Knowledge) - Hong Kong’s new generation of digital bank has announced its arrival with an introductory rate for deposits for 6%.  

ZA Bank Ltd, one of eight firms starting digital-only banks in Hong Kong, has started a trial run that pays over 3% more than those such as HSBC Holdings Plc and Standard Chartered Plc, for a selected group of depositors. Although many are doubtful that such rates could be maintained, such offer poses as a warning of forthcoming competition for the city’s deposit business. Currently, CMB Wing Lung Bank Ltd pays 3.8% to new savers for two-month HKD deposits.

ZA’s offering of 6% rate for three-month Hong Kong dollar deposits capped at HK$200,000 ($25,000), according to a person with knowledge of the matter. The accounts are set at a 2% rate with top-up of as much as 4% only to selected clients, the person said. Standard Chartered, HSBC and BOC Hong Kong Holdings Ltd pay 1.9% to 2.3% per annum for such maturity.

In the U.S, Ally Financial boasts of accounts with a 1.6% rate and three-month CDs at 0.75%, while Goldman Sachs Group Inc.’s Marcus venture offers a savings account with a 1.7% rate. ZA has said it will provide users with a “full suite of services 24/7,” and customers can open an account in five minutes with just a HK identity card. An HKMA spokeswoman said some banks may present “promotional” rates to some customers and emphasized that banking products are commercial decisions.

“While the Monetary Authority will not interfere with the commercial decisions of individual institutions, it would be a concern if a virtual bank planned to aggressively build market share at the expense of recording substantial losses in the initial years of operation without any credible plan for profitability in the medium term,” she said.

Virtual banks and traditional retail banking services are alike in certain aspects such as giving out loans and accepting deposits but setting up physical branches is not expected. Bloomberg Intelligence foresees the new banks will find it difficult to make inroads into the city’s loan market, grabbing just a 1.5% share by 2025, as they will be held back by problems in attracting deposits and high costs for interbank borrowing.

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