Upcoming Online Only Banks to Liberalise China’s Financial Sector
Asia, Finance

Upcoming Online Only Banks to Liberalise China’s Financial Sector 

As businesses are reflecting on setting up digital business models that prove more convenient for their customers, China’s financial sector is making efforts to encourage online only banks. As per three people with confirm knowledge of the matter, the country is working to list first rules for covering digital-only operations and attract players including foreign lenders.

The guidelines could assist foreigners with existing China operations such as Citigroup Inc., Standard Chartered PLC and HSBC Holdings PLC, by permitting them to set up separate digital banking platforms. The rules come after companies’ use of data as well as digital and artificial intelligence technologies have transformed China’s financial services landscape.

Currently, foreign banks are struggling to make money in mainland retail banking due to the presence of vast physical networks of domestic rivals. The upcoming rules will allow them to partner tech firms for independent online-only bank platforms. With this strategy, people expect banks to be allowed to own majority stakes in online-only banking ventures. 

Covering existing banking units of Alibaba Group Holding Ltd and Tencent Holdings Ltd, the framework can be seen as China’s first comprehensive move to standardise oversight of fast-growing digital banking sector. Besides China, Hong Kong, Singapore, the UAE and Bahrain are also working towards improving online-only banks.

As per Bloomberg, the first of Hong Kong’s new generation of digital banks has come up with introductory rate of six percent or higher for deposits.  Sources claim that one of eight firms preparing to start digital-only banks in Hong Kong, started a trial run, which pays a select group of depositors more than three percentage points (much higher than any existing banks such as HSBC Holdings Plc and Standard Chartered Plc).

The six percent rate can be viewed as a warning of upcoming competition for the city’s $410 billion local currency time-deposit business. The accounts have been set at a two percent rate, but offer a top up of nearly four percent to select clients.

Earlier this month, the central bank and financial regulator of Singapore revealed that a group of 21 applicants are looking forward to get five digital banking licenses. The online platform of Ma – Ant Financial, ride hailing firm – Grab and telecom player – Singtel are some of them. Two licenses will assist holders to take deposits from consumers and three are meant to ease the process of wholesale banking.

In September 2019, the UAE welcomed its first digital business bank for entrepreneurs and SME businesses – E20. As said by the Managing Director and Vice Chairman of Emirates NBD, Hesham Abdulla, “E20., a custom-built digital business bank that will support the courage of entrepreneurs and enable start-ups as well as emerging and established small business owners to access banking services and more, seamlessly and conveniently, helping them focus more of their time on growing their business.” The bank was introduced post the success of Liv., the UAE’s first lifestyle-based digital bank for millennials launched in 2017.

In November 2019, Bahrain’s Bank ABC launched online-only bank locally, with the plan to expand it across the MENA region soon. Termed – Ila, the bank offers personalised banking methods with support of technology and data analytics.

Changing user requirements are likely to change the face of online-only banks in 2020. The changes brought forth by China will surely boost the digital banking sector.

Related posts