Swiss investment bank UBS is aiming to obtain a digital banking license in China in order to tap into the rapidly growing sector and to spur its further growth in the region. The company is reportedly in the process of developing its own online banking platform, which it expects should reduce costs and increase its customer base.

The bank's ambitious plans will still hinge on its ability to secure a digital banking license in mainland China. The company plans to immediately kick-start its project once it is granted the license. UBS Asia-Pacific region head, Edmund Koh, mentioned in a statement that the company has already applied for a nationwide, majority-owned digital bank license, which it expects to be granted later this year.

If UBS does manage to get a hold of the license, the company will be joining already established local players such as Tencent Holdings and Alibaba Group. Both companies already offer low-cost financial services through their respective platforms, which can be accessed by users across the country.

Koh had stated that he plans to incubate UBS' digital banking platform in China. Once it proves to be successful, the company plans to introduce the service to other markets worldwide. Koh hopes to rapidly increase the scale of its digital banking business in the region, a task he apparently has placed on himself with the help of Chinese authorities and the bank's local partners.

Private banking, particularly through digital platforms, has proven to be a very lucrative business for traditional lenders. Unlike traditional banking, digital banks are not burdens with expenses such as maintaining branches and personnel. The type of service also has a massive potential to increase in scale once it is adopted. However, issues such as high cost-to-income ratios still persist within the industry.

UBS estimates that the typical cost of acquiring a high-value wealth-management client, which stands at an estimated $25,000, can be reduced to as low as $60 through its digital banking platform. With the reduction in costs, UBS believes that it can expand its customer base in Asia from just 30,000 customers to as much as 200,000 within the next two years.

China is currently in the process of laying down the infrastructure and guidelines for the new batch of digital banking operators. This includes guidelines that will apply to both domestic and international players in China. For the new rules, regulators are focusing more on stringent requirements such as higher reporting standards, enhanced regulatory reporting guidelines, and higher capital requirements. UBS expects the new rules to be put in place by June or July.