Hong Kong banks may not be closing many branches, but they are beginning to adapt their outlets to make better use of the space available or a digital age. The banks hope making more use of technology within branches will allow them to cut costs and offer a more streamlined service, while freeing up staff and space in branches for more complex transactions.
The pace of digitisation of banking services in Hong Kong remains behind that of other markets such as mainland China and Singapore. For this reason, and because of the profitability of retail banking in the city Hong Kong has seen comparatively few branch closures, unlike in other countries around the world.
Nonetheless while the pace of change may be slower than elsewhere, Hong Kong banks, like those elsewhere, are still faced with the challenge of declining branch visits, and some of the highest rents in the world.
“When we ask our customers, ‘What makes you choose a bank’, they say that they want a bank with many branches including one nearby. But when we ask if they will use that branch regularly, they say ‘no’.” said Vincent Hui head of personal banking at Bank of East Asia.
For a consumer, seeing your bank on the street or in a shopping mall provides a degree of reassurance, consciously or subconsciously, that your savings are safe.
However, as well as high rents, Hong Kong’s banks also have to deal with the fact that mall operators try to avoid giving them space in their premise as branches are closed at weekends and in the evenings, and so attract fewer potential shoppers at such times than other types of shops. This leaves the banks with a problem. One solution with which a number of banks in Hong Kong, including Citi, BEA and Standard Chartered are experimenting, is digital or smart branches. These can include digital display screens rather than traditional pamphlets, staff using tablets, with optical character recognition tools to accelerate boarding processes, and interactive video links to bank staff in central locations.
BEA estimates that by the end of 2018 the total floor area of its branch network will be a quarter lower than at the end of 2015, contributing to around 20 per cent gross reduction in annualised rental cost. Having customers interact with so-called iTellers, video links to bank-staff based in a central location, also means that banks can stay open later into the evening, with a small number of staff serving customers in digital branches.
While Hong Kong is slower than many places in its adoption of digital, sufficient numbers of basic transactions are being carried out remotely that banks need to offer more services in their branches to make use of the space. Citi says that over half of its customers in Hong Kong are digitally active, and 95 per cent of transactions take place outside a branch.