Virtual banking knowledge remains moderate amongst Hong Kong customers

Neobanks are advised to partner with mobile wallets and offer credit cards to boost adoption.

Although majority of banking customers in Hong Kong are now aware of the term “virtual banking”, the general understanding of what it really means remains moderate, a study by Nielsen found.

A total of 93% of banking customers surveyed indicated that they are aware of virtual banking in 2020, up from 67% in 2018. However, 42% have heard of the term but lack a strong understanding of it. Meanwhile, 38% were unable to correctly cite a virtual bank’s name.

On the upside, around 7% of banking customers claim that they are currently using virtual banking services—which is encouraging given that the first virtual bank became fully operational just three months before the survey took place, according to Nielsen.

Further, the survey found that there has been a spike of intention to use virtual banking services, from 20% in 2018 to 37% this year.

“Whilst virtual banks gain popularity amongst the public, consumers lack a clear understanding of the services and nature. It is imperative for corresponding financial organizations to dedicate more efforts to promote the virtual banking concept and educate the public about this innovative initiative,” noted Eddie Au, senior director, financial services, Nielsen.

The study also observed that mobile wallet users are more likely to be willing to use virtual banking services in the future, with over half (51%) indicating this.

In comparison, only 27% of inactive mobile wallet users and 16% of non-users said that they will try virtual banking services.

“The result is not surprising as frequent mobile wallet users are more tech-savvy and have already adopted technology for financial management. In addition, the decision of using virtual banking for customers who are not active peer-to-peer (P2P) service users could be hindered by their unfamiliarity with fintech, such as making cash deposits or withdrawals through Fast Payment System (FPS),” Nielsen said in a press release.

Au further advised virtual banks to partner with mobile wallets as a way to boost the usage of their services.

“Given the positive relationship between virtual bank usage intention and mobile wallet usage, partnering with various Stored Value Facility (SVF) providers could help boost virtual bank usage. Alternatively, the feasibility of facilitating SVF issuance should also be explored,” Au noted.

Another way to lure more users to adapt virtual banking services is through offering credit card services. Over half of survey respondents or 54% showed interest in virtual bank credit card applications.

Meanwhile, 75% of potential virtual bank customers said that they prefer to start using virtual banks by opening a deposit account.

Customers are less excited about virtual personal loan services, which are often regarded as one of the popular market entry products for virtual banks, according to Nielsen. Only 18% of respondents claim they would consider applying for the loans in the future.