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Leveraging mobile financial services in Hong Kong
Hong Kong is one of the world’s most technology-savvy and well banked markets. However, out of its 90% adult population who have a bank account, only around one fifth are users of mobile banking, says Stefano Sorrentino, senior engagement manager of Value Partner’s Hong Kong office
Stefano Sorrentino 9 Feb 2015
 
   

Hong Kong is one of the world's most technology-savvy and well banked markets. However, out of its 90% adult population who have a bank account, only around one fifth are users of mobile banking. Local banks' CEOs are clear about this opportunity and the benefits of mobile financial services, such as increased revenue, greater customer loyalty and a lower cost-to-serve.

 

On one hand, the main barriers to usage in Hong Kong are related to security concerns and limited awareness of the benefits of mobile banking, highlighting the need for greater customer education. On the other hand active users, who are more likely to be young and affluent, are strongly seeking select features (ease of use, speed, real-time access, personalized caring, and money management). The demand is strong enough to influence their choice of provider. This is where banks, especially lagging second-tier players, must build their value proposition.

 

Customers

 

According to our recent online survey, the most popular incentive for using mobile banking in Hong Kong is the convenient and time efficient 24/7 access, followed by the need to closely manage personal finances and investments in capital markets, in tune with the city's reputation as a regional financial hub. An important aspect to note is that promotional schemes offered by banks generate almost no impact on customers' decision to use mobile banking in the longer term.

 

The top preferred features can be in turn grouped into four main buckets:

 

· Alerts for cash deposits, withdrawals and reminders for payments due or low balance, to avoid late payment fees

 

· Money / account management in real-time, intended mainly for making payments and transfers but also checking balances and transactions

 

· Customer service, including for emergency issues such as finding the closest ATM machine or blocking lost / stolen cards

 

· Real-time access to capital markets, reflecting the importance of wealth management services for Hong Kong residents

 

These features are valued by customers to the point that over 60% of mobile banking users claim to be willing to open an account with a new bank, if its mobile banking provides all these services in a reliable and speedy manner, further highlighting its customer acquisition potential.

 

Payments as the uptake generator

 

In addition to the basic mobile banking functionality mentioned above, specific attention should be provided to payments. Banks in Hong Kong offer EPS (electronic payment services) and PPS (payment by phone service) as a coalition, which enjoys wide acceptance for bill payments. However, the role of banks in Hong Kong in the overall payment space is still limited when considering online, peer-to-peer and physical payments. In particular:

 

· There is limited presence of bank transfer payment solutions for e-commerce, where credit cards and e-wallets (e.g. PayPal) are dominating the competitive online payments battlefield

 

· Banks provide basic, non-user-friendly peer-to-peer payment solutions, at times charging customers

 

· Initial market entry attempts into physical payments have not seen much success due to limited customer utility and upfront fees, and the transportation-based Octopus card continues to dominate, capturing 82% of cash-less transactions in terms of number

 

In all these areas, the competition is becoming increasingly fierce, as even non-banking players like AliPay (which is working with shopping malls to enable tourists from China to pay using the mobile app), PayPal and increasingly compelling products and services from Apple, Samsung, and Square target customers using digital payments as the main point of entry. However, these are all still evolving and there has not emerged a clear winning model as yet.

 

Banks, in comparison, enjoy some unique competitive advantages such as their customers' accounts, the knowledge of their spending behaviours, and the opportunity to conduct a lending business, to mention a few. These strengths should be adequately leveraged to develop an attractive proposition, which can help banks acquire and retain new and existing customers.

 

Winning solution

 

With customer expectations evolving rapidly beyond traditional branch servicing, mobile banking is an important channel in the Hong Kong context. While increasing loyalty and cross selling opportunities can help boost revenues, mobile banking can also be useful in reducing the cost to serve.

 

It is thus essential for Hong Kong banks to offer an uncluttered mobile application that enables quick and easy access to customers' accounts, provides the 'peace-of-mind' through caring features and allows customers to manage wealth in real-time (e.g. account information, recent transactions, stock information, etc.) The last feature presents obvious challenges in the area of IT development, and could require partnerships with capital markets entities.

 

However, the multitude of choices and the criticality of certain decisions for success make the path to achieve this objective far from straightforward. The winning solution involves several strategic decisions regarding the type of services to deploy, the technology to use, the right partnerships to set-up, how to work around other players in the value chain (e.g. MNOs), and so on.

 

In this attractive and extremely competitive context, Value Partners Management Consulting can provide its expertise to assist financial institutions in developing a robust mobile strategy, to successfully capture the early mover advantage and ultimately a greater share of customer value.

 

Stefano Sorrentino is a senior engagement manager of Value Partner's Hong Kong office

 

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