In Focus
FINANCIAL SERVICES | Nathanielle Punay, Hong Kong

Virtual bank data scientists are driving bank hiring

Employers are now looking for more data scientists and full stack developers for mobile and web applications that go beyond the traditional set of tech skills.

With eight virtual bank licenses issued in 2019, it is no understatement to say that a real hiring race is underway for virtual banking talent. HSBC, which topped Hong Kong Business’ list of biggest banks in Hong Kong, saw end- 2018 headcount rise by 6.9% to 31,000 from 29,000 in 2017. Bank of China (Hong Kong) which is actively participating in the virtual banking race, nabbed second spot with 12,216 employees in Q1 2019, up 2% from 2017. Hang Seng Bank followed at third place with 8,679 employees, up 13%. Standard Chartered’s hiring figures remained flat at approximately 6,000 but still bagged fourth place, whilst The Bank of East Asia grew its headcount by 19.3% to 5,376.

Overall, the number of employees at the top 20 banks in Hong Kong surged by 243.1% to 295,005 as of Q1 2019 from 85,981 in 2017.

"Virtual banking has definitely been the buzzword of Q3 2018 when a lot of different financial services firms were eager to join the game,” said Eddie Cheng, manager at Michael Page Hong Kong, adding that investment banks, local, Chinese retail banks and insurance firms are players that have been most active in tech hiring.

Firms, in particular, have been looking for IT directors and IT managers to lead their growing tech teams. However, key tech talents have moved away from the traditional set of skills as the fintech race heats up, especially after banks realised that most of the upcoming virtual banks were backed by the major financial firms. In-demand positions now revolve around data science/analytics, digital strategy, UX/UI, cyber security and full stack development.

“We anticipate hiring will remain flat in 2019 and do not expect a sudden surge in volume. Much of the hiring will be on key hands-on positions rather than strategic/management roles. However, candidates in the cyber security, cloud, data science, and development space should remain optimistic,” Cheng added.

In a report published in eFinancialCareers, Riley King, senior manager for digital technology and accounting & finance at Hays, observed a spike in the number of data scientists job postings from six to 100 in the past two and a half years.

The most in-demand role, according to King, are full stack developers for mobile and web applications, as banks intensify efforts to enhance their front office trading systems. There is also heated demand from fintechs looking for individuals with expertise in digital payment systems, digital asset management, blockchain and cryptocurrency, according to Hays Asia Salary Guide.

“Due to the shortage of local qualified candidates in the current fintech space, both banks and start-ups have been more flexible in relocating superlative candidates from overseas,” according to the report.

However, Hays warned that traditional banks could be at a disadvantage due to their drawnout interview processes, lessflexible working environments and packages as compared to what startups can offer.

Standard Chartered’s ploy
One of the virtual banks licensees, Standard Chartered (SC) admitted that they’ve resorted to recruiting from Europe, US and Australia due to the severe talent shortage in Hong Kong. By forming a joint venture with Ctrip Financial and telco firms PCCW and Hong Kong Telecom (HKT), SC was able to create its virtual banking entity, SC Digital Solutions, which is now looking to elevate their tech hiring process for the upcoming launch of its virtual bank. SC said that they already hired around 100 people and plans to add another 40 in their team ahead of its official launch in six to nine months Harjeet Baura, financial services consulting leader at PwC Hong Kong, echoed the sentiment, adding that virtual banks only serve as a booster for tech hiring.

“We expect this trend to continue across the financial services sector for the foreseeable future as traditional banks and insurers, as well as new virtual banks and insurers, look to capitalise on the wave of technology-led disruption that is impacting all industries,” he said.

The rise of virtual banks
So far, the Hong Kong Monetary Authority awarded eight virtual bank licenses, namely: Ant SME, Insight Fintech, Fusion Bank (formerly named Infinium), Livi VB, SC Digital, PingAn One Connect, WeLab and Zhong An Virtual Finance. Two of the approved virtual banks are entities backed by some of the largest banks in Hong Kong, namely, Bank of China (BOCHK), Standard Chartered and ICBC (Asia). Ant SME Services is backed by Ant Financial Services Group.

Meanwhile, Fusion Bank is formed through a joint venture between ICBC, Hillhouse Capital and Chinabased investment firm Tencent Holdings. Insight Fintech is backed by smartphone brand Xiaomi, which owns 90% of the joint venture, and non-bank financial firm AMTD Group.

“We see [virtual banks] as an opportunity to explore new business models, and provide a more appropriate and innovative services to different customers,” an SC spokesperson told Hong Kong Business. “We are embracing digitisation and partnerships to reinforce our competitive advantage.”

SC added that its new virtual bank will bring a whole new tech stack and a whole new customer experience, complementing to its main bank.

“Whilst there will be undoubtedly many virtual banks, we believe the main value of banking will always be customer trust,” he added.

On the other hand, HSBC, which is ranked as the largest bank in Hong Kong, doesn’t seem to have any plans to apply for a virtual bank license.

“We can see no real benefit today in launching a virtual-banking only offering to our customers,” said Ewen Stevenson, group CFO of HSBC, during their Q1 2019 post-results analyst meeting. “We have the biggest mobile bank in Hong Kong.”

The bank currently has digital products, such as their PayMe mobile wallet which was launched in 2017. Stevenson described this as the largest peer-to-peer payments vehicle in Hong Kong, and even has plans for it to become a businessto- consumer platform. He also revealed that they are spending US$1b in upgrading their mobile platforms for retail banking across over 20 of their markets.

The firm also mentioned that they are in the midst of recruiting for a new digital trading proposition that they plan to offer SMEs.

“So we’re not complacent about [launching a virtual bank], but, like most markets where we’re an incumbent. The biggest competition today is not from new virtual startups; it’s from existing competitors,” Stevenson continued. 

How banks should cope
According to a Moody’s report, the growth of virtual banks could leverage on the large number of tech-savvy customers as well on the cost savings brought by branchless operations. It would also be supported by its parent companies, benefitting from its strong financial and technology resources.

“These large banks’ sizable fintech investments will allow them to offer competing digital banking experiences to the virtual banks’ target customers. Additionally, the large banks derive significant revenue from businesses that have higher hurdles for virtual banks to penetrate, including wealth management and most corporate banking business,” Moody’s added.

However, Baura of PwC warned that virtual banks must not be wholly reliant on their parentage to gain market share.

“A new virtual bank will not come with the legacy of a large organisation and infrastructure of a traditional bank,” Baura said.

“The organisations will be extremely customer-centric, with driving and delivering a better customer experience at its heart, and addressing pain points that traditional banks have been unable to solve.”

As virtual banks can operate at lower costs, they now have more space to create more competitively priced products and services.

This will come at the expense of traditional banks, whose business models’ will be threatened by the combination of a differentiated customer experience and lower pricing. Moody’s said that the banks’ digital race may give midsize and small banks a hard time, particularly those serving small businesses and individual retail customers.

Traditional banks, Baura says, must be able to present the same level of digitalisation efforts as virtual banks.

[Photo: Standard Chartered's virtual banking team]


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