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Alun John

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 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.
Banks are closing branches all over the world, but why not in Hong Kong?
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.
Branches remain relevant for some of our clients but where we have them and what we do in them is changing – it’s all about key iconic locations and where clients need us, and they are increasingly becoming wealth and advisory centres
Angel Ng, country business manager, Hong Kong, Citibank
Over half of Citi’s 24 branches in Hong Kong are now smart branches, and 55 of BEA’s 78. The latter has the goal of transforming all its branches into digital branches by the end of this year.
The result is that branches need fewer staff to process the same amount of transactions, and can do so in a smaller area, resulting in substantial cost savings.
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.
This has the added benefit of improving relationships with shopping mall operators, who welcome the extended operating hours.
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.
“The smartphone is really the new branch for transactional needs, so it basically gives Citi a branch network in the millions,” claimed Angel Ng, Citibank’s country business manager, Hong Kong.
“In terms of physical footprint, branches remain relevant for some of our clients but where we have them and what we do in them is changing – it’s all about key iconic locations and where clients need us, and they are increasingly becoming wealth and advisory centres,” said Ng.
By using more of a branch’s resources to offer more complex services, banks can gain better returns on their costs.
BEA also hopes to use its branches for more sophisticated transactions, and Hui said this required further investment in the staff employed in the branches.
“In every branch now we are carrying out staff optimisation to put the right people in the right position, and find ways to build up their capabilities so that they can fulfil the new tasks that they will have to do.”
However, while all Hong Kong banks are investing significantly in digital technologies, they still have some way to go.
“If you compare Hong Kong and mainland China, Hong Kong is lagging behind when it comes to the use of digital technology in banking,” said Cliff Sheng partner at Oliver Wyman.
“Because there is less competitive pressure from fintech companies in Hong Kong than the mainland, banks have not needed to adapt as quickly.
“In fact, a number of banks with a major presence in Hong Kong that also operate in mainland China offer more digital services in there than they do in Hong Kong.”


Hong Kong bank branches aren’t closing – but they are evolving digitally

People walks past a branch of the bank in Central. 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. Photo: Sam Tsang

People cross the street next to a Citibank branch in Hong Kong on October 08, 2008. The Hong Kong Monetary Authority announced it will cut its key interest rate by 100 basis points from Thursday, looking to address the credit crunch that has wreaked havoc on markets worldwide. AFP PHOTO/MIKE CLARKE

Interview with General Manager and Head of Personal Banking Division of BEA, Mr. Vincent Hui on BEA's innovation centre at the BEA Tower in Kwun Tong. 09MAY17 SCMP / Dickson Lee

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The city’s major lenders are exploring digital branches and hope that mobile and online transactions will free up staff to sell more


Hong Kong bank branches aren’t closing – but they are evolving digitally

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The city’s major lenders are exploring digital branches and hope that mobile and online transactions will free up staff to sell more

The city’s major lenders are exploring digital branches and hope that mobile and online transactions will free up staff to sell more