The stakes could not be higher as the battle heats up for one of the worlds most coveted banking markets.
Introducing in the incumbents corner HSBC and SCB. HK banking operations generate 58% and 42% of total group profit before tax for HSBC and SCB respectively. The earnings are of the highest quality with substantial retail components and are also readily repatriable, as opposed to other parts of their extensive networks. The incumbents have got a large share of the market and long established relationships with older consumers and corporates. They also offer extensive global banking connectivity.
Introducing in the challengers corner, Tencent, Alibaba, Ping An and Xiaomi. These big tech players from China have just been granted digital banking licenses by the HKMA. WeChat pay and Alipay have already garnered a huge share of the worlds largest mobile payments business by Chinese spending domestically and abroad. Ping An is the worlds largest insurer. Xiaomi is the worlds 4th largest smart phone maker. The challengers have got massive financial resources and proven entry points for the younger, more tech savvy consumers.
Don’t expect a first round knock out. The global financial crisis and regulations have taken their toll on the incumbents so there are questions as to how well they can respond to the speed and power of the incumbents. However, the challengers have less experience in operating under strict banking regulatory requirements. There could also be partnerships and agreements between the contenders that limit the ferocity of the encounter.
This promises to be an epic clash- that will likely set the tone for what will happen across the other major financial markets in Asia and beyond.
https://www.ft.com/content/b5f48a50-7240-11e9-bf5c-6eeb837566c5