Swiss bank UBS hopes to launch a digital banking platform in China first before subsequently bringing it to the global market.
Edmund Koh, UBS’s Asia-Pacific head, said that the lender hopes its application for a nationwide, majority-owned digital banking license will make significant progress after June or July, once China lays down new regulations for digital banking.
“We need scale, and I’m going to get that scale for UBS, working together with the Chinese authorities,” said Koh to South China Morning Post. “Today’s affluent in China will be tomorrow’s high-net-worth individuals and then billionaires.”
Koh plans to target China’s fast-expanding middle-class that have funds of between $100,000 to $200,000 at their disposable, by providing them with channels for investment in domestic securities and mutual funds.
UBS’s proposed digital bank will be situated in Shenzhen’s Qianhai area, at the core of the economically pivotal Greater Bay Areas, which has a population of over 69 million and encompasses Guangdong province, Hong Kong and Macau.
According to Koh a digital banking platform could help reduce the cost of acquiring wealth management clients from USD$25,000 to just $60, as well as expand UBS’s Asian customer base from 30,000 to 200,000 within the space of just two years.
Once Koh manages to build a licensed digital banking platform in China he then plans to export the same model to other markets around the world.
Koh, who hails from Singapore, has overseen Asia-Pacific operations rise to 31% of UBS’s pre-tax earnings in the first quarter, as compared to around 20% in recent years.
UBS’s Asia-Pacific pre-tax profits were close to $800 million in the first quarter, for a 154% surge compared to the same period last year, driven by major portfolio shifts during the market turmoil created by COVID-19.
China is already host to a number of exclusively digital banks that are amongst the country’s first private lenders, including Chongqing’s XWBank, Alibaba-backed MYBank, Tencent-backed WeBank and CITIC aiBank.
The Chinese banking authorities are currently in the process of drafting rules governing digital banking applications for both domestic and overseas companies, amidst a push for the greater use of fintech in tandem with efforts to contain associated risk.
Industry insiders say that the new regulations will place stricter curbs on digital financial activity, however, which will drive up the cost of operations.