Hong Kongs Digital Banks Rethink Physical Branches To Improve Customer Experience

Some Hong Kong digital banks are rethinking their strategies and considering physical branches in Hong Kong, according to reports from the South China Morning Post (SCMP). This shift comes after the HKMA’s recent rule change, aimed at supporting their growth.

WeLab Bank, ZA Bank, and Mox Bank are open to adding brick-and-mortar branches, while Livi Bank has opted to remain fully digital for now. The respective Hong Kong digital banks shared their perspectives in separate responses.

The HKMA granted eight virtual bank licences in Hong Kong in 2019 to foster innovation and competition. In October, it introduced a new rule allowing limited physical branches and replaced the term “virtual bank” with “digital bank” to boost public trust.

“Flexibility in allowing non-electronic channels in a limited manner will improve transaction processes and enhance customer experience,” said an HKMA spokesman, who emphasised that the agency will closely evaluate branch proposals.

Mox Bank is exploring a physical presence in Hong Kong focused on advisory services while maintaining its commitment to digital services. Standard Chartered co-owns the bank, which plans to use its physical space to complement its online offerings.

WeLab Bank, which reported its first monthly profit in December, is also considering offline banking options. CEO Tat Lee said,

“It is important that the offline channels utilise diverse methods to interact with the public and enhance awareness of the digital banking services.”

ZA Bank, Hong Kong’s largest digital bank and the first to post a monthly profit in July, welcomes physical branches. “Face-to-face interactions can significantly improve resolution processes and enhance the overall customer experience,” a spokesman said.

In contrast, Livi Bank sees no immediate need for branches. “Our focus remains on delivering innovative digital products,” a spokesman said, adding that customers are increasingly comfortable with fully digital services.

Traditional banks, meanwhile, are shifting their approach, closing smaller branches and focusing on prime locations in Hong Kong to attract wealth-management clients. Bank of East Asia, for instance, opened a large Harbour City branch last year after halving its network to 48 branches over a decade.

OCBC Bank opted for a hybrid banking strategy, a contrast comprising a sustainable, digital forward banking model in Kai Tak while halving its OCBC locations in Hong Kong to four offices.

Brokerage Phillip Securities is expanding and upgrading its branches to attract new clients. Louis Wong, executive director of Phillip Capital Management, said,

“Branches have an edge in drawing new customers,”

emphasising their role in fostering client relationships. Futu Securities International, which began as a digital broker, also now operates four outlets across the city, including a new branch in Causeway Bay.