Is this the changing face of banking in Hong Kong?
In the last four months the Hong Kong Monetary Authority (HKMA) has granted eight virtual banking licences to established banks launching digital arms, and also tech firms, in what seems to be – despite some opinion that this ‘adoption’ is happening later than expected for a world finance hub – a clear ambition for the region to embrace, and compete, in a digital banking future.
And are these eight new ‘challenger banks’ coming to the market to disrupt the incumbents? Or are they defending their territory amid the wave of new European fintechs, and the rising number of tech firms from mainland China who are extending into bank-like services?
Banking innovation; still early days
First of all, fintechs are not necessarily the banking enemy. Fintech is already helping banks in other markets be more progressive, less commoditised, and more collaborative in the digital age. However, online-only providers are also bringing advanced tech capability, added convenience, and in some cases, a personality, that has changed how people interact with financial products and services.
When it comes to choosing to join, or stay with, a bank, the experience on offer is often a deciding factor. While increased digitisation has certainly made banking simpler, it's still early days and innovation, it's fair to say, has so far has focused on more ‘transactional’ products and services, like account authentication, frictionless payments, currency exchange, and digital wallets.
But with access to account services through technology now a basic customer expectation, are heightened levels of accessibility and convenience enough to create a winning customer experience and durable relationship?
Bringing ‘instant gratification’ to premium rewards
In the evolving competitive landscape banks of all origins will need to place customer experience at the centre of their strategies. As one of the world’s leading financial cities and with its large wealth demographic Hong Kong has a high proportion of premium banking customers who will pay a higher price for accounts and cards that offer them specific benefits. While features like air miles are one common form of elite reward, they offer little differentiation. At this level, customers are increasingly looking for a strong fit with their personal lives, hobbies, interests and passions when choosing new products and services.
And as more tech-led brands make instant gratification a core part of their customer experience, conventional banks will need to work harder to provide their most valued customers with 'reminders' of their core value, and account features set them apart – both from their peers as well as the digital entrants.
Loyalty programs, and rewards in particular, present a perfect opportunity for banks to deliver non-transactional innovation. Better still, banks can still work with fintechs to help them deliver it - extending the customer relationship beyond core products and services.
Similarly, while the fintech model is based around innovation, loyalty is not as established a principle as it is in the retail market. As such there is an opportunity for digital only providers to learn from those more experienced in loyalty initiatives. In fact, the chief executive of the HKMA said, “I believe that virtual banks will have to offer innovative and customer-centric services in order to attract customers.”
Room to co-exist
That’s why despite speculation about fintechs being a threat to the retail banks, I don’t see one overtaking the other – particularly in a market as large and dynamic as Hong Kong. The individual core strengths of legacy banks (established customer trust and access to plentiful customer data) and fintechs (an ability to reach large volumes with new technology) mean that both can co-exist. Indeed, some Hong Kong banks are already launching initiatives with fintech partners to improve their customer offerings and we see more of this in the future, rather than fintechs devouring the deposits of the existing banks.
As Hong Kong increases its digital footprint, it’s an opportunity for providers of all origins – established and emerging – to explore the role of digital in attaining and maintaining customer loyalty, to deliver a brand-owned connection that deepens their relevance to high-value customers within this highly dynamic market.
So how does Upgrade Pack fit in?
Our exclusive marketplace for flight and hotel upgrades is bringing a first-to-market category of customer reward for private banks, premium current accounts, exclusive credit card and loyalty programs to offer their most valued and loyal customers.
We know from research that an upgrade is the most valued travel-related benefit for 95% of travellers.
By working with only selective banking and credit card clients, we protect brand equity to provide a high-perceived value loyalty benefit, that is unmatched by your direct competitors.
Customer purchase upgrades using our participating bank’s own credit card, securing additional incremental revenue for our banking and card issuer clients.
Available upgrades provide instant gratification in the form of a premium, lifestyle-led reward that has unlimited usage year-on year.
Sit back. Our exclusive marketplace does all the work, connecting directly to our airline and hotel partners’ booking systems - enabling your customers to search, find and secure their own deals, 24/7 .
The resulting data helps our clients understand their customers better – their triggers, habits and motivations to help them segment and better tailor future offerings.
For more information visit https://www.upgradepack.com
Questions? Connect with me on LinkedIn here