Opportunities and Challenges Brought About by Rapid Growth of Digital Banking Transactions


19 Apr 2022

Opportunities and Challenges Brought About by Rapid Growth of Digital Banking Transactions

The banking industry in Hong Kong has been actively driving innovation and developing financial technology (fintech) in recent years.   Banks have been providing many different types of innovative services and products to customers through digital channels so that members of the public are able to “enjoy it all at their finger tips” on a single device when using banking services.  In addition to providing a conducive policy framework that facilitates the industry to take advantage of the opportunities brought about by the rapid development of technology in an orderly manner, the HKMA also ensures diversified development of the market to release the enormous potential of future finance, benefitting different stakeholders in our society.  Along with the provision of convenient and efficient financial services by banks, the HKMA also endeavours to maintain the best international standards in areas such as cyber security and consumer protection.

Let’s take Faster Payment System (FPS) as an example.  In a short period of some three years since launch, the number of total registrations has exceeded 10 million, setting a new milestone in its development.  In March this year, the average daily turnover of real-time transactions reached 831,000, amounting to HK$ 6.3 billion and RMB 200 million.  The usage of the FPS will further expand going forward, bringing the development of retail payment in Hong Kong to new heights.

Banks in Hong Kong have also demonstrated their market acumen and mastery of new technologies, enabling the public to experience waves of innovation of digital banking services.

In order to better understand the latest situation of digital banking services in Hong Kong, the HKMA conducted its first survey on the use of banking services by bank customers via digital and non-digital channels in the second half of 2021.  The survey covers 20 conventional retail banks and 8 virtual banks.  Digital channels include internet banking, mobile apps and self-service facilities (such as ATMs and smart self-service kiosks).  The survey results are quite interesting and I found some of the observations a bit surprising. Let me share them with you.

Digital channels have become the key delivery channels of banking services

  1. High penetration rate of digital payment services. Along with the information about FPS above, 98% of local payment instructions processed by retail banks via FPS and Real Time Gross Settlement were made by customers via digital channels, with only the remaining 2% made via non-digital channels (such as branches). As for cross-boundary remittances, 80% were also conducted via digital channels by customers in the first half of last year. 
  2. Digital channels have become a key account opening channel. With the successive commencement of business operations of the eight virtual banks in 2020, more than 1.2 million accounts have been opened by the end of 2021. For all retail banks, personal accounts opened via digital channels accounted for 39% of all new personal accounts opened in the first half of last year. Compared to 2019 when only 17% of personal accounts were opened via digital channels, this reflects the increasing popularity of using digital channels for opening bank accounts by the public. The increase in the proportion of account opening via digital channels by small and medium-sized enterprises (SMEs) was even more significant, from 1% in 2019 to 20% in the first half of last year.
  3. Applications for personal credit facilities via digital channels have become more popular. During the first half of last year, 59% (2019: 32%) of credit card, 49% (2019: 28%) of loan-on-card and 61% (2019: 41%) of unsecured personal loan applications were made via digital channels. Even for property mortgage applications which are more complicated, the proportion of applications made via digital channels also rose to 2.5% in the first half of 2021 from less than 0.8% in 2019. All these banking products and services are essential to the daily life of the public, and the figures show that banks’ efforts in investing in digital resources to bring convenience to customers have led to a win-win situation.
  4. The proportion of investment and insurance products sold via digital channels has grown multiple times. During the first half of last year, investment transactions conducted by retail banks via digital channels reached HK$2.7 trillion, representing an increase of nearly 120% as compared to the second half of 2019. As for long term insurance policies, only 4% of them were sold via digital channels in the second half of 2019. However, in the first half of 2021, the proportion has risen to 12%, which is an impressive growth.
  5. Transformation of traditional ATMs. With the increase in the delivery of banking services through digital channels, changes have also been made to the services provided by traditional ATMs. Some new services include cash withdrawal by tapping an NFC reader or scanning a QR code with mobile phones. The survey shows that nowadays the public mainly (over 90%) withdraw cash via digital channels.

Bank customer protection in respect of digital channels

Banks have been at the forefront of fintech, providing customers with efficient and convenient banking services through digital channels.  Increasing acceptance and usage of digital channels by the public in turn creates greater incentive for banks to invest in the development and enhancement of new products through digital channels.  Such interaction between the two is mutually beneficial and in line with our goal of promoting digitalisation of banking services.

Nonetheless, irrespective of the delivery channel, bank consumer protection is an important area where the HKMA will never loosen our guard on.  The HKMA fully recognises that banking consumer protection and the development of fintech must keep pace with market advancement.   Thus we staunchly support the joint effort of the Hong Kong Association of Banks and the DTC Association in revising and enhancing the Code of Banking Practice in December last year, ensuring bank consumer protection will not be compromised with the more advanced and convenient service channels and modes provided by banks.  Rather, with the facilitation of fintech, banks can now provide more tailored services, while offering better protection at the same time.  Major enhancement measures in the revised Code include: ensuring banks will make disclosures of accurate and clear product information in promotions for banking services through social media or key opinion leaders; requiring banks to enhance information disclosure in respect of local and cross-boundary payments, product applications and transactions, etc.  The HKMA also sees the public concern on cyber frauds and bogus advertisements that appear from time to time, and requires banks to issue warnings to customers and to provide channels for the public to authenticate digital promotional activities of banks, so as to assist the public to avoid falling for scams.

Digital channels undoubtedly enable bank customers to have easier access to services and products. However, some customers may also tend to make decisions more hastily.  In view of this, the HKMA introduced back in 2020 enhanced disclosure measures in the form of a “double reminder” in respect of applications for unsecured loan and credit card products by bank customers through digital platforms. This serves to ensure that banks provide borrowers with prominent and sufficient information, as well as adequate opportunity to consider the implications of their borrowing carefully and thoroughly, thereby achieving “To borrow or not to borrow? Borrow only if you can repay!”

Digital channels promote financial inclusion

Some people are concerned that the active expansion of digital channels by banks will lead to reduced physical banking facilities, affecting the use of banking services by certain customer segments.  We noted in recent years that banks have progressively streamlined and refined the scale, network distribution and operation model of physical banking facilities.  For example, banks have been relocating, merging and closing some branches, whilst utilising innovative technologies to provide traditional teller services, including the introduction of video teller machines which use means of “distant video conferencing” to interact with customers.  This ensures that, in addition to enhanced efficiency during the digitalisation process, the needs of different customer segments are also catered for.

Indeed, regardless of the means and channels that banks use to provide services, they should properly consider the need of their different clientele, including the elderly, persons with impairment, vulnerable customers and those who cannot effectively use digital banking services due to the lack of relevant knowledge, ability and devices, and provide facilitative measures and facilities.  This is the principle of treating customers fairly that banks must uphold, which is also essential in promoting financial inclusion.

The next step

Banking consumer protection is an ongoing and important task.  Looking ahead, among our priorities will be developing protection measures for some new service models (such as “buy now, pay later”).  We have also launched a fresh round of review of the Code of Banking Practice with the industry, with reference to the implementation in the realm of digital banking services around the world of the High-Level Principles on Financial Consumer Protection published by G20 and the Organisation for Economic Co-operation and Development.  The review seeks to enhance consumer protection in respect of digital banking services, covering many areas such as information disclosure, customers’ finance management, and dispute handling, etc., so as to ensure our measures are in line with the latest international trends and best practices.

Relatedly, the HKMA learnt that Mainland bank accounts maintained by some members of the public may have become dormant or have been suspended for various reasons, and the account holders are facing difficulties in reactivating these Mainland bank accounts by visiting the bank branches on the Mainland in person due to the pandemic situation.The HKMA has communicated with the Hong Kong banking industry and encouraged the relevant banks in Hong Kong to assist the public to reactivate their Mainland bank accounts through different means, including the adoption of fintech solutions, thereby facilitating the public to continue using the services offered by Mainland banks like before as soon as possible.

Meanwhile, the first batch of retail green bond under the Government Green Bond Programme will be open for subscriptions by Hong Kong residents starting from 26 April.The HKMA encourages those interested to subscribe through digital channels, so as to experience the convenience brought about by digital banking services while pitching in the green cause of the issuance.


Eddie Yue
Chief Executive
Hong Kong Monetary Authority

19 April 2022

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Last revision date : 19 April 2022