Meet ZA Bank, Hong Kong's first virtual-only lender

The bank’s slogan of co-creation belies a strong charm offensive of attractive deposit rates.

The first half of 2020 saw the dawn of a new era of banking in Hong Kong, with the city’s virtual-only lenders kicking off operations. The recent lockdown resulting from precautions amidst the pandemic outbreak only further fueled digital banking take-up. In fact, a survey Finastra expects that almost a third or 28% of Hong Kong’s adult population will own a digital bank by 2025, with around 760,000 people forecasted to open a virtual-only account in the next five years. For Finastra, whoever emerges on top will depend on which of the eight digital-only banks would be the quickest to establish operations in Hong Kong.

But Hong Kong’s first virtual bank to launch, ZA Bank, has no plans to focus on cooperation rather than competition—a point reflected on its slogan ‘“Be Different, Together.”

“ZA Bank does not see other virtual banks as competitors. On the contrary, we hope to promote financial inclusion together with them, to foster the development and innovation of the banking industry,” Rockson Hsu, CEO of ZA Bank, told Asian Banking & Finance in an exclusive correspondence.

The brainchild of ZA International—the business development platform of Chinese online-only insurance platform ZhongAn Online— instead highlights its operating model, which is centred on co-creation with its clients. The neobank communicated with its clients ahead of its official launch during the product development and design process, the spokesperson shared.

But as every business man knows, it’s the silent competitor that often proves to be the most deadly, and ZA Bank has definitely launched a strong charm offensive to mark its entrance in the industry. In January, the bank offered a competitive introductory rate of 6% for deposits capped at $200,000, over 3 percentage points more than established banks such as HSBC, Standard Chartered, and Bank of China Hong Kong. Currently, ZA Bank offers a savings rate of 1% for a deposit value of up to $500,000, compared to the 0.001% general savings deposit rate.

Asian Banking & Finance caught up with ZA Bank CEO Rockson Hsu to learn more about ZA Bank, it’s goals for the future, and it’s outlook for Hong Kong’s virtual banks.

Tell us more about ZA Bank. What have you been up to since you first launched? What are your thoughts on being one of Hong Kong's first virtual-only banks?
Unlike traditional banks, ZA Bank provides users with a full suite of services, 24/7. These services include efficient mobile banking facilities, such as remote account opening, multicurrency savings accounts, time deposits, local transfers, and e-statements

The structure of ZA Bank is relatively simple, and it has strong innovation capabilities. We can quickly respond to market needs with innovative products.

ZA Bank does not have any physical branches. Users can enjoy convenient banking services without leaving their homes. Compared with traditional banks, users can scan their ID card, take a selfie, and send the documents via their smartphone. A process like opening a bank account has never been this simple. Therefore, we can reduce costs like rent and the operating costs of manpower tremendously.

Due to an efficient operating model and lower operating cost, we can provide attractive pricing to our customers. For example, savings products with attractive interest rates. Because of our commitment to financial inclusion, we do not impose a minimum savings balance requirement or any maintenance charges.

With its community-driven approach, ZA Bank has prioritised the rapid launch of its innovative capabilities that align with customers' changing lifestyles. In March 2019, a community known as ZA Fam was established by ZA International, in which members are invited to participate in ZA Bank's product development and design processes, thus guiding ZA Bank to create innovative products and services to better serve the needs of Hong Kong users.

Tell us more about your products and services. Who is your target customer base? What services does ZA Bank offer, or plan to?
For individual customers, we provide savings deposits, time deposits, loans and transfers.

We launched ZA Savings Go, a flagship savings product on 24 March. With ZA Savings Go, we offer a savings rate of 1% for deposit balances at HK$500,000 or below, whilst base interest rate will be applied to deposit balances exceeding HK$500,000 .

Time deposits offer multicurrency deposits, including HKD, RMB and USD. Minimum time deposits start at just HK$1 and the range of tenors is flexible from one month to one year.

We also introduced Hong Kong's first-ever 30 Minutes Pledge for our loan service. From submitting the complete set of information and documents to receiving the application results, the whole process will be within 30 minutes. Should any applicant have to wait for more than 30 minutes, we will provide a cash rebate of HK$10 for every minute of overtime until the application result is provided to the applicant, with an upper limit of HK$500. There will also be a seven-day cooling-off period for ZA Personal Loan, during which users may choose to repay early without incurring any early repayment charge.

Regarding fund transfers, the Faster Payment System (FPS) offers round-the-clock instant fund transfers with no service fee. With just a mobile number, email or QR code, users can transfer HKD and RMB. We also support “5 seconds recall” in case users transfer to the wrong account. Users can also transfer USD to other local banks through "CHATS".

Can you give us an estimate of when you believe you will start making a profit?
We have set a “Five-year Plan” for our future development, one of the targets is to break even within the period. As an important initiative of the fintech reform and innovation in Hong Kong, virtual banks aim to lower the entry barrier of banking services by fintech, to cover more people with different financial needs. We remain confident in the future development of virtual banks in Hong Kong.

How has ZA Bank been received by the public so far? Can you share with us your numbers? For example, how many have signed up for an account?
ZA Bank has been well received since our official launch on 24 March. Notably, since we launched the promotion campaign riding on the Government's cash payout scheme “I Want 11K” in late May, the number of new customers grew faster than we had ever seen.

A month after our official launch on 24 March, we published the data of our first batch of customers. Surprisingly, our youngest and oldest customers are 18-year-olds and 87-year-olds, respectively. As of the end of May this year, the oldest customer we have is 93 years old. This interesting data showcases that virtual banks could be an emerging service that brings innovative user experiences to different age groups. On the gender perspective, we found that the ratio of men to women is about 2 to 1.

Has the pandemic affected your operations, or led ZA Bank to reangle its strategies and goals? If so, how?
As a virtual bank, ZA Bank has no physical branches and can open accounts and conduct transactions online. Our customers can enjoy 24/7 banking services anytime, anywhere, only needing a mobile phone and their Hong Kong ID card, and account opening can be completed in only five steps. Customers’ mobile phones become their personal branch. Our digital-only service covers the most basic multicurrency savings accounts, time deposits, local transfers, and electronic statements, amongst others. Therefore, pandemic or not, our users can always use the banking service on their phones, without leaving the house.

Since the beginning of this year, we began to conduct risk assessments and prepare contingency plans  to minimise the impact of the epidemic. Right after the Chinese New Year holiday, we asked all employees to work from home, even after the public holidays. At the same time, we already made a good deployment of hardware, so that every colleague can work remotely through the intranet and their laptops at home. ZA Bank operates as usual during the epidemic period, to provide customers with 24/7 banking services.

If possible, can you share with us your future projects and plans you have in store in the coming year?
Currently, we are still focusing on the Hong Kong market, as there is still quite a journey for Hongkongers to take before they fully embrace virtual banking and fintech in everyday life. We will focus on nurturing the local users for the time being.  We are putting customers at the heart of our product design to solve their pain points and allow users to enjoy offerings that break the boundaries of time and conventions.

One example of this is our full suite of 24/7 services, available in our one-stop mobile app.

Our ultimate goal is to make banking and financial services more user-friendly and support Hong Kong's underserved population, which will in turn accelerate fintech innovation in the city and, at the same time, encourage traditional banks to up their game in Hong Kong, which will ultimately benefit all of the 'city's consumers. 

What is your outlook on Hong Kong's virtual banks for the next few years?
Hong Kong's fintech sector is growing fast. With the full launch of  other virtual banks in Hong Kong this year, as well as traditional banks beginning to embrace AI and cloud technology, fintechs are set to disrupt the traditional model of financial services and blur the lines between different sectors. At the same time, traditional banks are expected to adopt more technology-based solutions to manage costs and achieve operational efficiency amidst a rapidly evolving and increasingly competitive industry landscape.

As we look to the financial industry's future, one thing is certain: change will be the only constant. The broad themes we are predicting are around the changing nature of risk, a more competitive environment and increasing digital transformation, all underpinned by a focus on data.

The development of virtual banks in Hong Kong will promote fintech application and innovation, enabling the expansion of banking services to people with different financial needs, to foster financial inclusion. This was also the original intention behind establishing ZA Bank. Meanwhile, traditional banks will speed up the innovation of services, which leads to industry transformation. The action will eventually benefit end-users and the market itself.