Hong Kong’s eight digital banks are set to expand their wealth management services due to significant growth in deposits, loans, and net interest income.

None of the digital banks have reported a net profit, though their losses have narrowed.

The digital banks, ZA Bank, WeLab Bank, Mox Bank, Ant Bank, Livi Bank, PAO Bank, Airstar Bank, and Fusion Bank, began operations in 2020 after receiving licenses from the Hong Kong Monetary Authority (HKMA) in 2019.

As of the end of 2024, they have accumulated HK$64.39 billion (US$8.3 billion) in deposits, a 74% increase year-on-year.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ Hong Kong’s digital banks reach critical inflection point after pandemic boost

Hong Kong’s eight virtual banks have achieved a significant growth milestone, attracting HK$64.39 billion (US$8.3 billion) in deposits by the end of 2023, a 74% increase year-over-year according to the original article’s calculations.

This rapid expansion follows their 2019 licensing and 2020 launch, with the HKMA’s August 2024 review confirming they’ve now collectively reached 2.2 million depositors, representing a 20% year-over-year customer growth 1.

The operating income for these digital banks has increased sevenfold while net losses narrowed by 15% between fiscal years 2021 and 2023, demonstrating improving financial fundamentals despite not yet achieving profitability 1.

This growth trajectory aligns with global digital banking trends, where traditional banks closed approximately 7,500 branches between 2017 and 2021 as consumer preferences shifted dramatically toward online services 2.

The pandemic provided an unexpected boost for these branchless operations when they launched in 2020, creating behavioral changes that have persisted even as COVID restrictions ended.

2️⃣ Wealth management expansion targets massive generational wealth transfer

The digital banks’ push into wealth management is strategically timed to coincide with the largest wealth transfer in history, an estimated $84 trillion that will move primarily to Millennials and Gen Z over the next two decades 3.

These younger demographics prefer digital-first wealth management services, creating a natural expansion opportunity for Hong Kong’s virtual banks that already have digital infrastructure and growing customer bases 3.

Traditional wealth management has typically focused on high-net-worth individuals, but digital platforms are democratizing access through technologies like robo-advisors that can serve broader customer segments with lower minimum investments 3.