KPMG expects virtual banks in Hong Kong to play a limited initial role in the financial sector with projections to capture only up to 3 percent of the city’s deposit base.
Virtual banks will only attract a few thousand customers each, said Paul McSheaffrey, Hong Kong’s head of banking and capital markets at KPMG China, which would result in acquiring just 2-3 percent of the deposit base.
This represents a small fraction of the HK$6.9 trillion ($881 billion) in local currency deposits sitting with Hong Kong’s 164 traditional banks, according to data from the regulator.
Payroll Accounts
Despite a slow initial start primarily covering the retail business, McSheaffrey expects an eventual shift to provide loans to retail partners; offer long-term lending; and focus on the oft-underserved small and medium-sized enterprises, especially with regards to payroll accounts.
With no interest paid to payroll accounts, there is little incentive for employers to switch banks to pay salaries while the cheap funding base will allow virtual banks to generate sound loan income with more predictability.
«When customers start to switch their payroll accounts to virtual banks, it will have a more tangible impact on the profitability of virtual banks,» said McSheaffrey, according to an «SCMP» report, though this will likely not occur till 2020.
