Consumer Banking in Hong Kong: Where Reputation Meets Digital Innovation

As a leader in digital disruption, Hong Kong has a strong reputation in banking technology innovation. However, despite this emphasis on innovation, banks in Hong Kong behave very much like traditional financial institutions, primarily focusing on financial stability. 

In the 2024 iteration of our Consumer Banking Report, we surveyed 1,000 banking customers in Hong Kong to gauge their attitudes and behaviors around a variety of banking topics, including AI, instant payments and more. And just like Hong Kong leads the charge in banking innovation, from a consumer standpoint, it also leads the way in favorability when it comes to their banks. To understand why, Mary Kim, EPAM’s Sales Specialist for banks in Hong Kong, gives more context.

From your perspective, what sets Hong Kong apart in the financial services sector? What unique challenges do banks in the region face, and what unique advantages do they have at their disposal?

MK: Hong Kong has always been one of the leaders in the banking space. And now we’re seeing this innovation influencing how people use their banks. For example, a vast majority of consumers will look to choose a primary bank from among a handful of the big players. And they usually decide which of these institutions they’ll bank with based on reputation. In fact, I would argue reputation is likely the deciding factor when it comes to choosing a bank. This is the bank they’ll work with for savings, checking, salary, etc.

However, what we’re seeing nowadays is that many people will also choose a separate digital bank to use for their day-to-day interactions – sending money to friends, splitting bills at lunch, that sort of thing. The digital banks here are more advanced just in terms of user experience. 

What’s worth noting is that many of these digital banks are owned and operated by the larger institutions. However, they tend to maintain them as separate brands, largely to maintain their existing reputation as a traditional financial institution.

In our research, reputation with the wider public was cited as the primary factor when choosing a bank, cited by 38% of respondents. Reputation was deemed more important than customer service. Given the importance, are there steps that banks are taking specifically to protect or promote theirs?

MK: A bank’s reputation is vitally important here and really serves to give people a sense of security. People want the confidence that their primary bank is not only going to secure their personal data, but also going to provide a reputable in-person experience. The branch experience is very important in Hong Kong – a lot of people still frequent branches to deposit checks, discuss banking matters with their managers, etc. 

In fact, reputation here is tied closely to the in-person experience the bank provides — the better their in-person experience, the better the overall reputation of the bank. That’s why banks have a large physical presence here — more branches equate to more convenience for customers, who in turn feel their bank is making life easier for them. 

As we analyzed the consumer survey data, we saw that of those customers in Hong Kong who have changed banks in the last five years, 25% cited a poor digital experience as the primary reason why they switched – a rate higher than any other country surveyed. What implications should this have on Hong Kong banks as they look ahead to the digital tools and service offerings they provide their customers?

MK: Hong Kong has such a strong reputation for being innovative when it comes to the digital experience — especially when it comes to a digitally-native bank — but, with the larger banks, the experience isn’t always the most convenient for customers. 

There have been a lot of efforts made lately at instituting cosmetic changes, but the apps and websites the banks have been using for the longest time are very outdated. Either they’re hard to navigate, or it takes too long to find what you’re looking for. Eventually, it’s just easier and faster for me to go to a branch and actually talk to someone in person. 

Whereas with the digital banks, they tend to have much more intuitive UIs. Oftentimes, it's actually easier to just send money from your main account to the account you have with a digital bank and then just quickly conduct transactions there.

Are there a lot of efforts by the larger banks to incorporate the experience of the digital banks into their own brand, given that many of these digital banks are owned by the larger banks?

MK: It takes a lot of time and a lot of effort, as the larger banks tend to have their own legacy systems in place that require large-scale engineering efforts to accommodate similar user experiences. From their point of view, it's easier to acquire and maintain a digital bank than it is to undergo the digital transformation process to incorporate their tools and services into their existing systems. Plus, by maintaining digital banks as a separate brand, they’re able to better protect their own reputation in the event of any sort of issue with the newer technology.

Speaking of new experiences, we saw customers across the board wanted banks to provide them with personalized advice on how to better manage their money or offer personalized financial education. This was especially high in Hong Kong, where 77% of customers cited this as something they wanted from their banks. Are there any steps banks here should be taking to meet this demand?

MK: This is something banks will eventually make real progress on, but for now they’re taking a cautious approach as there is a lot of reputational risk involved. To provide personalized guidance at scale in a cost-effective manner will require a lot of proprietary technology, like the wider use of customer data, AI and machine learning for analysis, and agile banking systems capable of running it all. As I said, banks here are very sensitive about their reputation, and protecting their customer data is a big part of that. There are just so many unknowns in the AI journey right now. We’re more likely to see innovation here driven by the digital banks and slowly incorporated by the larger institutions once proven out.

That’s not to say large banks here aren’t providing these types of personalized experiences. For example, EPAM recently helped a global wealth management firm create and implement a new app designed to provide investors in the region with access to personalized investment research, insights and market reports. The app even helps connect users to financial advisors. It’s proven so useful it’s become a part of the client’s global platform.  

Fifty-one percent of respondents in Hong Kong noted they hold credit cards with a financial services provider who are not their primary bank. This was very much an outlier, where the global average was 37%. Is this a trend driven by anything unique to the market, or does it represent an area where banks need to improve their own offerings to win back this disintermediation?

MK: It’s not common for people here to switch banks, largely due to the inconvenience involved. However, there is a whole universe of new credit cards constantly coming to market — and often the banks here will partner with other organizations to launch new, innovative card products. One bank might offer a really attractive cashback program while another might partner with an airline to provide a great miles program. 

There’s a lot of competition here to provide attractive rewards and incentives to entice new customers, but that doesn’t often equate to customers switching all of their accounts from their primary banks. If another bank is offering a more attractive credit card program than their primary bank, customers will eagerly sign up just for those rewards and benefits.