One of Hong Kong's first virtual banks to begin operations has announced an industry-first promotion intended to steal away depositors from the city's traditional financial institutions. ZA Bank Ltd announced its arrival in the city with a massive 6 percent introductory rate for first-time depositors.
The virtual bank, which is a unit of ZhongAn Technologies International Group, revealed that it is offering a 6 percent rate for a select group of depositors as part of its trial run in the city. The rate is over 3 percentage points more than the rate offered by traditional Hong Kong banks such as Standard Chartered and HSBC Holdings.
Industry experts have expressed their doubts about whether the virtual bank will be able to maintain such rates for a long period of time. However, the extremely high-interest rate could still allow it to steal deposits from traditional banks, giving it a slight edge in the fight for a piece of the city's estimated $410 billion worth of local currency time-deposits.
Analysts at CMB Wing Lung Bank have stated that the introductory rate is likely nothing more than a gimmick that will never become the standard in the industry. CMB currently pays 3.8 percent, one of the city's highest rates, to new depositors for its two-month Hong Kong dollar accounts.
Apart from ZA, eight more virtual banks are expected to being operations this year. The Hong Kong Monetary Authority (HKMA) has granted all the newcomers licenses. The companies include ventures backed by conglomerates such as Tencent Holdings and Ant Financial.
ZA began its initial operations in December last year, becoming Hong Kong's first digital-only bank. As part of its big opening promotion, the bank offered a 6 percent rate for its three-month Hong Kong dollar accounts. Each depositor is limited to a maximum deposit of HK$200,000, or roughly $25,000. In comparison, HSBC only offers 1.9 percent and BOC Hong Kong Holdings offers 2.3 percent for the same maturity.
ZA's introductory rates are also much higher when compared to other virtual banks around the world. In the UK, Monzo only offers depositors a 1.3 percent rate. In Australia, 86400 offers depositors a 2.25 percent rate, while in the US digital bank Ally only gives a 1.6 percent rate for its three-month deposits.
ZA mentioned in a statement that it would eventually be rolling out other products as part of its ultimate plan to offer a "full suite of services" to Hong Kong customers 24/7. When asked about the bank's rates, the HKMA stated that any kind of promotional rates offered by companies is their own commercial decisions. However, the agency stated that it would only interfere if the banks aggressively build market share at the expense of substantial losses without any real and credible long-term plan.
