Small Business Accounts in Hong Kong

Starting and running a small business in Hong Kong can be a challenging but rewarding endeavor. As a small business owner, one of the key considerations you will have is finding the right banking partner to support your hong kong company.

In this article, we'll look at the banking needs of small businesses in Hong Kong and highlight how to choose a bank for your business.

What does SME mean?

Defining SMEs is not straightforward. Definitions differ between countries, and also the types of indicators used vary from one country to the next. Indicators usually used include employment, assets, capital, and revenue. 

A common way to define SMEs is to use two indicators, such as employment (as in how many people are employed by the specific business) and a financial indicator, such as capital or turnover. 

For example, Malaysia considers manufacturing companies to be SMEs if they have less than 200 employees or revenue of less than RM50 million (about $12 million). In Hong Kong, the only criterion used is the number of employees. Your business will fall under the SME category in Hong Kong if it has less than 100 employees (if it’s a manufacturing company), or less than 50 (if it’s a non-manufacturing company).

What are Small business accounts in Hong Kong?

The goal of SME business banking is to provide small and medium-sized enterprises with the financial tools and resources they need to grow and succeed. By offering a range of financial products and services tailored to the needs of SMEs, banks can help these companies manage their finances more effectively and make informed financial decisions.

One key component of small business banking is the business bank account, which is also known as a business account or a corporate bank account.

Small business accounts in Hong Kong are financial accounts designed for small and medium-sized enterprises operating in Hong Kong. These accounts may include a range of services and products, such as business checking and savings accounts, loans, lines of credit, and credit cards. Small business accounts may also offer specialized financial products and services, such as foreign exchange services.

The challenges of small business banking in Hong Kong

Despite SMEs’ importance in the world and in Asia, usually, they are the ones facing the most difficulties when trying to access banking services. Traditional SME banking has no shortage of problems. These range from inflexible products and rigid processes to customer friction and legacy tech-blocking changes within banks. [*]

Opening bank accounts in Hong Kong tends to be especially difficult for start-ups and foreign companies and worse if you happen to tick both boxes.

Let’s see why that might be the case. 

1. SMEs are overlooked and underserved

Banks are looking for profits at the end of the day, and SMEs, with their relatively low individual revenues, have thus been less of a priority for incumbents. A banking alternative presents itself in solutions offered by new digital entrants, but SMEs have yet to benefit from digital innovation to the extent that retail customers have.

2. Banks don’t offer tailored products to SME needs 

SMEs are diverse and have a great variety of needs, but most banks don’t tailor products to SME subsegments or match them to the various business life stages. For example, banks often tend to adopt unreasonably high benchmarks, such as actual sales revenue for approving a new account, and early-stage companies are unable to meet these benchmarks.

3. Fees

SMEs often have limited financial resources and operate on tight budgets and margins. This can make it challenging for them to afford the fees associated with business banking services, which can eat into their profits and make it difficult for them to sustain and grow their businesses.

4. Process complexity and friction

The processes for serving SMEs within banks are often based on those used for retail or corporate customers, which can lead to a lengthy, complex, and frustrating experience for SMEs.

For example, many Hong Kong banks often require a start-up to provide the same degree of detail on its track record, business plan, and revenue projections as a long-established company. In contrast, many times, such information is not readily available to provide.

5. Legacy banking systems blocking change 

Legacy banking systems have long been a major challenge for SME banking transformation projects. These systems are often outdated and inflexible, making it difficult to implement new technologies and processes.

However, in recent years, the rise of digital challengers in the banking industry has increased the pressure on traditional banks to overcome their legacy systems and become more agile and innovative. As a result, many banks are now focusing on modernizing their systems and processes in order to better serve SMEs and stay competitive in an increasingly digital landscape. [1]

6. Complex regulation and compliance needs pose challenges 

Combating money laundering and terrorist financing after the global financial crisis in 2008 has become a more important issue. This resulted in tighter regulatory standards almost everywhere in the world. Hong Kong is no different.

As a result, some large banks have become more cautious in establishing business relationships with new customers. Some compliance hurdles affecting SMEs especially include:

• that all directors and beneficial owners of a foreign company are required to be present at account opening,
• the requirement that all documents of a foreign company are certified by a certifier in Hong Kong
• banks ask for voluminous or detailed information on the source of wealth, sometimes dating back decades ago.

In essence, Hong Kong banks’ due diligence checks on customers need to be stringent but not prohibitive so that SMEs can access the services they need. You can find more information in our article about why opening an account in Hong Kong is so difficult.

How can small businesses choose the right bank in Hong Kong?

In Hong Kong, there is a wide variety of options for banking services. These include international banks, national banks, or even virtual banks. And some businesses are using fintech solutions as an alternative to traditional business bank accounts.

To help you make an informed decision, here are some criteria to consider when evaluating your options:

1. Bank account opening

In general, as a small business, you'd prefer to apply for a business account online with a seamless opening process.

A seamless business account opening process means that the process of applying for a bank account is straightforward and efficient, with minimal required documentation and no unnecessary delays.

Time is often a critical resource, as you may have limited staff and resources to devote to administrative tasks such as applying for a business account. A seamless application process allows you to focus on running your business and generating revenue rather than being bogged down by paperwork and bureaucracy.

2. The fees

A small business also needs to minimize the fees spent on banking services - here; you need to look at both transaction costs and maintenance costs. A lot of the time, the fees will turn out to be decisive factors when SMEs choose their banks.

3. The services and digital features

Consider the types of services that the bank or the payment solution offers to support your business, such as online banking, payment cards, multi-currency account feature if you're dealing with multiple currencies, or even foreign exchange services.

Also, more and more small businesses often require financial literacy advice and digital tools to assist with financial planning and management. These tools can include features such as expense and budgeting systems within banking apps. Other examples of digital tools that can be useful for small businesses include online invoicing and payment systems, digital accounting software, and financial planning and forecasting tools.

4. The customer support

SMEs often rely on the personal experiences of their decision-makers when setting their expectations for professional services. In general terms, research on SMEs shows how important customer service really is - regarding both satisfaction and customer loyalty.

For example, as a McKinsey survey shows, that great customer service is the number-one reason SMEs choose their main bank. Other important aspects include the proximity of branch locations and an enhanced online channel. [*]

Nonetheless, a human point of contact remains important for many SME customers, as only 1 in 4 would give up access to their relationship managers for a digital alternative. [1]

But SMEs differ in the level of interaction they want. For example, smaller companies have basic needs, and 61% of them want a low-touch relationship with their banks, while medium-sized businesses more often have complex needs (35%) that require more support. [1]

5. Financing solutions

Another key area when choosing banks or fintech solutions for SMEs is access to financing solutions, as it is often one of their biggest pain points. [*]

The loan application process is often paper-heavy and can take weeks or months to get approved. Many SMEs don’t have the liquidity to wait around for that long to receive the money.

Digital solutions can make this access easier, for example, by integrating solutions into the digital banking app that tracks cash flow and easily provide the required information for loan applications. Almost 70% of SMEs view applications for grants, loans, and credit using digital channels as important.

How Statrys can help?

This might surprise you, but there is not necessarily a ‘best’ bank for small businesses. 

SMEs are very diverse, and their needs differ greatly too. What your company needs to focus on is to figure out your priorities, essential services, and features needed and then start looking at what banks can offer services to support your unique needs. 

If your company is incorporated in Hong Kong, Singapore, or the BVI, and you're looking for an alternative to banks, you may want to consider Statrys to save time and money:

• Business account application is 100% online – you can open your account remotely, with no need to visit a branch
• Multicurrency business account where you can hold 11 currencies. The account also includes payments cards and currency exchanges services
• No account opening fee, no initial deposit, and no minimum balance – our pricing plans are easy to understand and transparent. However, we may charge an account opening fee for certain companies raising compliance questions (doing business with a company registered on an exotic island has a cost!).
• Internet banking is accessible from mobile and App to manage your account online
• Quick response – guaranteed to hear back from us within 48 hours after the request is submitted.
• Phone, Wechat, WhatsApp, Live Chat – get in touch with a real person to answer your questions!

In summary

Understanding the options and requirements for opening a bank account in Hong Kong is an important step for businesses looking to establish a financial foundation in the region.

Traditional banks, virtual banks, and fintech solutions are all options to consider, each with its own unique features and benefits. To learn more about the process of opening a bank account in Hong Kong, be sure to check out our article for a comprehensive guide.