Hong Kong, with a population of seven million, is already served by 151 licensed banks and is one of the most over-banked markets in the world.
Nevertheless, in an effort to boost innovation, the regulator issued eight additional digital bank licences in 2019, a decision that has turbocharged the already fierce competition in the city's banking sector.
Virtual banks in Hong Kong collectively saw a 20% increase in customer numbers, 23% growth in total deposits and 19% growth in loans last year. But this belies a more complex reality.
The annualized customer growth rate has plummeted from 200% year on year in 2021 to a mere 28% in the first half of 2023
The initial hurdle is new customer acquisition. The annualized customer growth rate has plummeted from 200% year on year in 2021 to a mere 28% in the first half of 2023. Moreover, a staggering 55% of these accounts remain dormant, according to a report from consultancy Quinlan & Associates.
This suggests that the customers digital banks have worked so hard to attract, often at great expense, are not engaging with their services beyond high interest rates on saving accounts.
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