Deposit rates are a topic of major debate in the financial sector. It appears that most of the banks will struggle to offer any competitive returns.
In Hong Kong, however, that situation is a fair bit different. Its deposit rates have proven to be rather spectacular.
The Deposit Rates Conundrum
A lot of banks around the globe are struggling financially. Profit margins have become significantly lower in recent years. This translates to lower deposit rates for consumers. In some cases, those rates have already become virtually unappealing.
Things are a bit different where short-term deposits are concerned. Established institutions can still provide a rate of 2% to 3% on those. Even HSBC Holdings and Standard Chartered can adhere to those figures.
It is evident that such rates are not accessible to everyone. It applies to specific clients under very specific circumstances. Moreover, these offers are often issued on a first-come, first-served basis.
ZA Bank Bucks the overall Trend
Big was people’s surprise over the recent announcement by ZA Bank. This digital bank active in Hong Kong provides an introductory rate of up to 6.8%. That is very different from renowned and established banks around the globe.
Several conditions apply, however. It is only accessible to up to 50 different users. The rate will apply to deposits up to HK$100,000 for a period of three months. This is a step up from the previous 6% rate for deposits capped at HK$200,000.
Maintaining these rates will prove incredibly challenging. It is certainly a gimmicky approach. In half a year from now, the rates will probably be cut in half, if not more. For ZA Bank, this is a great way to generate some initial buzz.
The Uneasy Situation Persists
Hong Kong has made a lot of media headlines in recent months. Because of the rising tension, many expect money to flow out of the region at an accelerated rate. So far, there are no signs of this taking place. That can, in turn, lead to higher deposit rates for the foreseeable future.
Moreover, one has to wonder if Hong Kong banks will follow the Western world. In the West, it is common for banks to slash key rates. This spells trouble for customers, as they will have to cough up the money.
Even among new entrants, such as the challenger banks, deposit rates are incredibly low. Monzo provides just 1.3% to its customers. No company comes even close to what ZA Bank provides right now, albeit for a limited time to select customers. The digital bank has also confirmed new services and rates will will out in stages.