Resources

Neobanks vs. Traditional banks in Hong Kong: Which should you choose?

When we think of banks, many picture a building with tellers and consultants providing financial advice, and helping with everyday transactions. However, this is no longer today’s reality. Banking is now done online or via mobile – and neobanks are proof of this.

With its increasing market share, neobanks are changing the way businesses operate. In fact, Hong Kong has the third-highest adoption rate of neobanks in the world with 14% of consumers having a primary financial relationship with neobanks. By 2025, experts predict that neobanks could produce an annual revenue of up to HK$76 billion, giving them a combined revenue market share of 19.3%.

In this article, we’ll take you through all you need to know about neobanks and whether it is a good option for your business.

Overview

What are neobanks?

Neobanks are FinTech businesses that offer banking apps, software, and other technology. They are typically characterized by the following:

  • Providing digital solutions to banking products from credit and debit cards to savings accounts.
  • Being 100% digital, with the accounts operating via mobile apps.
  • Not having any physical branches or physical bank cards.
  • Providing customer service through an app or website.

Some neobanks are fully-licensed financial institutions that operate independently, while others partner with established licensed banks to offer a range of services. There are also neobanks that have been created by traditional banks themselves.

Neobanks often focus on the user experience by leveraging advanced technology to increase efficiency. They aim to fill the gaps that traditional banks can’t. It could be a simple issue such as not being able to get in touch with your bank for an urgent query. With neobanks, help is literally at your fingertips 24/7.

Neobanks in Hong Kong

Hong Kong was one of the first markets in the region to have fully-digital banks. In March 2019, the Hong Kong Monetary Authority (HKMA) approved the market’s first batch of virtual banks. The first three licenses were granted to Standard Chartered, Bank of China (HK), and mainland insurer ZhongAn. The introduction of neobanks has been a key pillar in Hong Kong’s entry into the smart banking era.

The regulation of virtual banks in Hong Kong falls under the HKMA. Under these regulations,

  • Banks with these licenses must engage primarily in retail banking.
  • Even though they don’t have branches, they are required to have a physical head office in Hong Kong.
  • In addition, they are obligated to accept all interested clients without setting any minimum balance requirement. This is an advantage, especially for smaller businesses that are just starting out.

What is the difference between a neobanks and a digital bank?

There are several big differences between the two forms of banking:

Neobanks Traditional Banks
Operate fully online Have physical branches, but offer online banking too
Fully digital onboarding and account opening Have to go to a branch to open an account
Online banking is the standard Online banking is a feature/td>
Lower, more transparent fees Higher fees that can often be hard to understand
Customer support online or via phone Customer support online, via phone or in person

3 reasons why you should choose a neobank

There are various reasons why neobanks are the more attractive option for both personal and business banking services. Here are three of its main draws:

Fast, efficient and convenient

One big advantage neobanks have over traditional banks is that consumers can open an account via a mobile phone or computer. Even though internet banking is popular among traditional bank customers, such establishments still need consumers to physically turn up at a branch to open an account.

When it comes to opening a business account, it can take months to get one via a traditional bank. Let’s not forget the fact that you’ll have to gather a list of documents before you can even go to a branch to open the account.

Neobanks, however, generally have much quicker processes. For example, Airwallex is able to process and approve a new business account faster than a traditional bank. This is due to its digital onboarding process which speeds the process significantly.

Comprehensive and budget-friendly

Anything businesses can do via a traditional bank can also be done with a neobank account. Plus, banking transitions via neobanks are quick and simple. Without offering other banking services like mortgages or car loans, neobanks are able to concentrate on the ones that they do. Also, because neobanks don’t have a physical presence, they are able to pass these cost savings over to their customers. Renting premises make up a huge chunk of a bank’s overheads and not having one means it is consumers who benefit with lower fees. 58% of small businesses picked low fees as an important factor when choosing a business banking partner. And only 34% of such businesses were searching for an ‘established financial brand’.

Niche, and personalized to your needs

Neobanks’ are designed with the customer in mind and aim to provide a personalized banking service. Artificial intelligence (AI) is used to keep track of your data as well as to customize your experience on the app. Many of them have built-in services such as bill-pay reminders, to make your banking experience more personal and efficient.

Neobanks are an especially exciting choice for anyone who enjoys doing everything online. The time and resources they put into the service they provide mean the apps have unique features. For example, using AI to track your spending and warn you that you’re running out of funds. Its clever digital processes also mean it will be able to spot fraud quicker.

Which option works better for you?

The decision to go with a traditional bank or a neobank mostly boils down to two factors:

  • Current business circumstances and needs; and
  • Digital literacy.

Neobanks are certainly more suitable for those looking for simple, quick transactions. It’s also recommended for anyone who is more comfortable with the online sphere. For example, if you enjoy the personal touch of going to a physical bank and speaking to a customer service officer, a neobank might not be what you need right now.

As discussed above, both neobanks and traditional banks have their pros and cons. Your individual needs as a business will determine which one you go for. Neobanks are the future of banking and a form of digital disruption that all businesses should leverage on.

They use cutting-edge Fintech solutions such as artificial intelligence and machine learning to give customers not just a high level of service but a simpler, more effective experience too.

Looking for a simplified business account? Sleek offers a free business account with Airwallex. Through this, we allow you to send and receive money in an instant, as well as provide services such as bookkeeping and cash management. Contact us today and we’ll take you through what you need for your company’s business account.

Start a business in less than 3 hours with us. Talk to our experts today.

Subscribe to our newsletter

Our jam-packed newsletter covers monthly compliance updates, upcoming events and exclusive offers

Other articles that might interest you

Related content

NEED TO SPEAK TO SOMEONE?

We'd love to help. Share your contact details and we'll call you back!

WhatsApp Us
whatsapp icon

Chat with us on WhatsApp from your mobile

qr_code_whatsapp
30 day moneyback guarantee

30 Days Money Back Guarantee

Our refund policy:

We care about you – within 30 days from your purchase, if you’re unhappy with our services, we’ll refund our fee. Email or call us, and we’ll process the refund within five working days.

What it doesn’t cover:

We will not be able to refund Government fees once the application has been submitted, nor any third-party processing fees.

When it applies:

We cannot guarantee any specific legal outcomes when you use our services. For instance, a company registration might be filed correctly but still get rejected by the Company Registry for reasons beyond our control. We can only refund our fees for issues we are directly responsible for. In the case that you purchase a service and later change your mind, we can’t issue a refund.

Our customer support team is at your disposal for any questions or issue you may face.

Need help?

Our sales team is available from Mon - Fri 9am to 7pm (Hong Kong Time)