HSBC has quietly launched its first digital wallet targeting start-ups and other small businesses in Hong Kong in an effort to fend off intensifying competition from Tencent and Alibaba in its most lucrative market.
Its PayMe e-wallet, which allows users to transfer small amounts of money, has been available to individuals since early 2017.
But Europe’s largest bank by assets is now looking to sign up more small merchants and has received “thousands of applications” since the April launch, according to Stuart Tait, regional head of commercial banking for HSBC in Asia Pacific.
The initiative to extend the service, which now has 3,000 registered users, to merchants is key because it represents a better chance of drumming up new business, the bank believes.
“We never really thought of it as a client acquisition tool in the [small and medium-sized businesses] space but a number of companies [have come] along that we don’t currently bank with,” Mr Tait said.
One attraction for the businesses that have applied is HSBC’s promise to make available to them data from PayMe’s base of 1.5m Hong Kong consumers, said Mr Tait. That will help them better gauge potential demand for certain goods and services.
The move to expand its mobile wallet service for commercial use also may help shore up HSBC’s position in Hong Kong against a challenge from two of China’s biggest companies – Alibaba, through its financial services arm Ant Financial, and Tencent.
Alipay’s e-wallet venture in Hong Kong, launched in partnership with local billionaire Li Ka-shing’s CK Hutchison Holdings, has signed up 50,000 merchants and more than 2m users since the joint venture was formed in March 2018. Alipay is owned by Ant Financial.
Both Tencent and Ant Financial won digital banking licences for the territory in April, adding to the competitive pressure.
HSBC did not apply for such a licence, but said it may reconsider, particularly if opportunities open up in the Greater Bay Area. The GBA project, designed to pull the former European colonies of Hong Kong and Macau closer to mainland China, is an area comprising nearly 70m people, with a $1.5tn economy that HSBC expects to grow to $2.8tn by 2025.
Virtual banking services are only available to people and businesses resident in Hong Kong, meaning they provide nothing HSBC can’t already offer customers, said Kevin Martin, HSBC’s head of retail banking and wealth management for Asia-Pacific.
“Setting up doesn’t make sense right now,” he said. “It may do if the regulations change or if GBA happens in a certain way. We are keeping a close eye on it.”
The digital battle is part of a broader struggle by UK-headquartered HSBC to retain its dominant position in the semi-autonomous city, where it has a 150-year history. Hong Kong accounted for nearly 60 per cent of HSBC’s pre-tax income last year.
But the bank faces an uphill battle to convince businesses it can build a big enough customer base for a new payment method in a crowded market.
In Hong Kong, “ever more players are breathlessly chasing the same set of customers”, said James Lloyd, a Hong Kong-based fintech specialist at consultancy EY.
“From stored-value facilities to virtual banks, the key questions for new players will be how to drive traction, maintain customer loyalty and on-sell more profitable services.”