Hongkong and Shanghai Banking Corporation (HSBC) announced this week that it will be removing its minimum balance fees for over 3 million of its customers in Hong Kong.
The move initiated by the largest bank in the city is likely the start of a new trend amongst brick-and-mortar financial institutions in China to remain competitive as the market gets flooded with new virtual banks.
HSBC announced that its monthly $6.40 charge to small depositors with savings accounts that fall below $640 will be removed. The fee abolition also applies to the bank's various accounts, including its advance accounts, which has a minimum balance requirement of around $25,550.
The bank initially imposed the below minimum penalties more than 18 years ago. HSBC mentioned this week that the penalties will officially be removed from its systems starting on August.
This will make the bank the first financial institution to go back to providing free savings services. The bank also announced that it will be getting rid of other charges in the coming months.
This will include minor charges such as over-the-counter transaction fees and annual fees. The bank's minimum deposit fee currently affects more than 3 million people living in Hong Kong. This includes depositors that have passbook accounts, advance integrated accounts, personal accounts, statement accounts, and super ease accounts.
The bank's head of retail banking and wealth management, Greg Hingston, mentioned in an interview that the removal of the below-balance fees, counter transaction fees, and annual fees are a clear testament to the bank's commitment to making banking easier for its customers.
Hingston also admitted that the decision to remove the fees was also due to the recent rise of virtual banks in the city. Hong Kong regulators recently issued new virtual banking licenses to a number of newly established virtual banks backed by China's biggest tech conglomerates.
There will be at least eight new virtual banks that will start their operations in Hong Kong sometime in the fourth quarter of the year. The Hong Kong Monetary Authority (HKMA) had issued eight virtual bank licenses since March and more licenses are expected to be issued in the coming months.
HSBC's move is aimed at preventing its current customers from transferring to the new digital banks, which also do not charge fees for small depositors.
Aside from its lack of fees, virtual banks also have very small operational costs given that they lack any kind of brick-and-mortar offices and branches. To combat this, major banks in China have started to enhance their respective digital services to retain their young and more tech-savvy customers.
