As the dust settles from the avalanche of regulations post GFC the clash between the traditional bank incumbents and the tech led challengers moves to centre stage.
It is becoming apparent that HK is the epicentre for this drama. This is the inevitable consequence of the following:
China big tech companies achieving massive scale and dominance in home market providing platform for growth elsewhere - in line with China BRI and RMB internationalisation initiatives
UK HQ’d global banks historically strong position in HK now vulnerable to a rise in global trade tensions and mounting local frictions - and with the UK completely distracted by Brexit
The HKMA granting digital banking licenses to 4 China big tech companies is just the opening tremor.
This contrasts significantly with other major international financial centres where the leading incumbents appear to be much better protected from a true heavyweight clash.
In the US global banks are not unduly threatened by non bank competitors building massive share in products (i.e. mortgages) where returns are no longer compelling for banks due to regulatory treatment. Ginnae Mae is introducing stress test and living will requirements on leading non-banks mortgage lenders.
In the UK the challenger banks got off to a roaring start and continue to build clients, but losses persist. Regulatory scrutiny increases as the challengers build scale.
In Singapore the incumbent domestic banks have done a fine job in building out digital capabilities ahead of the recent announcements of new digital licenses to be issued by MAS. The value in having strong and stable incumbents is well recognised.
So for banking volcanologists it has to be HK…