Hong Kong’s livi, a licensed virtual bank, has entered beta testing with the employees of its shareholders, says CEO David Sun. If the test goes well and tweaks can be made quickly, livi will be in a position to go to market.
livi is backed by the triumvirate of Bank of China (Hong Kong), Jardine Matheson and JD Digits. BoCHK has the largest stake, but not an outright majority, says Sun, declining to specify the exact shareholder arrangement. The point is that the three partners are all tightly bound to the virtual bank.
Sun has been a career retail banker, first in Beijing before moving to Hong Kong four years ago. In his last role, as BoCHK’s general manager of all retail and wealth-management businesses, he had a seat at the table when the bank’s top executives began putting livi together.
“Launching a brand-new bank is a rare opportunity and privilege,” he said. “All banks are eager to change by leveraging technology and new thinking.”
Integration the key
Several other VBs are also determined to win consumer hearts and minds. What will make livi stand out?
“This isn’t all about ‘banking’, but participating in the digital transformation of the whole society,” Sun said. “The shareholders are planning a long-term future.”
Speaking with Sun, DigFin gets the feeling that livi’s app may not look much like a financial product, at least not to begin with. Sun was not ready to disclose any details about products or design, but he spoke at length about integrating the three shareholders and their customer bases.
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He says the starting point will be to leverage the retail-facing businesses of Jardines. This conglomerate, still controlled by the Keswick family, has over 180 years of history in Hong Kong, as one of the city’s remaining two British-owned “hongs”, the other being John Swire & Sons.
Among its most relevant assets is the Welcome supermarket chain as well as franchises such as 7-Eleven, Maxim’s and Starbucks, all of which fall under Jardines’s retail division, Dairy Farm.
Unlike some other VBs, that are deliberately targeting millennials or the underbanked, livi is looking at the broadest population, by integrating banking with how people shop and consume.
He says open banking, as begun in the U.K. and Europe, will play a role. Livi is already in talks with potential partners. Will this be true open banking, in which a bank shares the data of its customers with others, or a one-way street, in which the bank takes others’ data to serve up products?
Talks are too early to say, according to Sun, but the emphasis will have to begin with security, as livi is a Hong Kong-regulated bank subject to local data-privacy laws. “We must be careful about standards and safety,” he said, including any APIs that connect livi to others.
Nor will revenues be the priority at the outset. Sun says it is difficult to convince people to make a VB their primary account bank; he expects it will take three to five years to achieve. At launch, the bank will not do lending. Last year, BoCHK vice chairman Gao Yingxin told the media that livi would rely on interbank lending for its funding, until it was able to build up deposits.
This is about participating in the digital transformation of societyDavid Sun, livi
Such questions require the bank to open for business first. “We don’t have customer data now,” Sun noted.
Its short-term goals are to win a following based on good user experience; although there is a call center, the ambition is for the technology to supersede the need for customer service. “It should just work,” Sun said, acknowledging that the public expects VBs to have much better service than incumbents. This is where JD Digits comes in, with its mobile app development and services such its remote eKYC capabilities, developed in mainland China.
Sun says livi represents the alliance of mainland tech expertise with two of the city’s oldest business names, with Bank of China having more than a century’s worth of history in Hong Kong. JD Digits’ parent, Beijing-based e-commerce company JD Group, is also likely to IPO in Hong Kong.
Its closest competitor is Mox Bank, the other VB whose biggest shareholder is an incumbent, Standard Chartered. (ICBC Asia has a stake in Fusion Bank, but that looks more like Tencent’s project.)
StanChart also has blue-chip Hong Kong partners but it owns 65% of Mox; whereas BoCHK has a more equal relationship with its partners. StanChart operates in over 50 countries, whereas BoCHK is more focused on the potential of the Greater Bay Area, linking Hong Kong to Macau and Guangdong Province. It is a leader in renminbi clearing and has piloted various Hong Kong-Guangdong banking projects.
This suggests to DigFin that StanChart can use Mox to export learnings to other markets. It has the freedom to one day bring Mox back into the StanChart “mothership”, or close it down, or let it run independently. BoCHK, on the other hand, would have to win approval from Jardines and JD.com to make any substantial changes to livi, and it has to succeed in Hong Kong to be worthwhile.