By Elizabeth Ching
While Hong Kong is known for its business-friendly tax system and infrastructure, it isn’t known to have the friendliest banking sector.
Startups and SMEs in particular have a hard time opening business accounts. So if you’re a first-time entrepreneur and haven’t been through the corporate bank account opening process yet, here are some tips that can ease the process.
- Set aside some cash to open the bank account
Opening a corporate bank account in Hong Kong is going to cost you a pretty penny. There are fees at every stage of the process, and for new businesses, when cash flow is tight, that’s something you should be prepared for.
Application fees can start at HK$800 and range up to $10,000 if you opt for a big bank. These fees are non-refundable if your application gets rejected.
You’ll also probably be required to make an initial deposit upon opening. For example, HSBC has an initial minimum deposit of around $10,000, and a monthly minimum balance that can range from $50,000 to $500,000. Typically, the more features you want in your bank account, the higher the initial deposit and monthly balance will be. Some business bank accounts may also have monthly fees, but these are typically in the $100 range.
- Apply as soon as possible, or well in advance
The process to open a corporate bank account can sometimes be very long-drawn-out. If you’re lucky and everything goes smoothly, it can sometimes come together within a month. However, in most cases, it will likely take two or more months to get everything up and running.
What causes the delay? Firstly, you have to book an appointment–typically a couple of weeks in advance. Then, after doing the account opening interview with a branch officer, the processing time can go on for months. Even after months of waiting, you still may not have a bank account set up.
This is why it’s important to apply for a business account as soon as possible, so when you’re ready to start your business, you’re not waiting on the bank account.
- Apply to a couple different banks at the same time
In addition to long and unpredictable application processing times, as mentioned above, high rejection rates for SMEs and startups is a known problem when it comes to Hong Kong banks.
That’s why it may be a good idea to send in multiple applications at the same time. The last thing you want is to be stuck with a rejection letter after being ready to launch for months.
Although this does entail the added costs of multiple application fees, some corporate service providers can assist with bank account opening, and send in multiple applications on your behalf for a fixed price.
- Plan your trip to Hong Kong in advance
Since incorporating a company in Hong Kong can be done online, many entrepreneurs incorrectly assume that they can get their businesses set up in Hong Kong without having to make the trip there. Technically, you can–at least until you need to open a bank account for your business. Hong Kong banks require you and all your company directors to come in for an application interview.
If you’re not regularly based in Hong Kong, it may be a good idea to plan your trip in advance, so you can schedule in other meetings and errands in the city as well, especially if you’ll be flying in from far away.
- Don’t be afraid to explore fintech alternatives.
The legacy banking system wasn’t built for startups and young businesses – but fortunately in today’s tech boom, there are numerous fintech companies providing alternative solutions to common services you could need.
Hong Kong is a fintech hub, and several SMEs offer alternatives to the traditional banking system. Additionally, Hong Kong is one of few cities to give out virtual banking licenses. There are several virtual banks now operating in the city, including Ping An OneConnect Bank (PAOBank) and SC Digital, a joint venture between Standard Chartered, PCCW, and Ctrip Hong Kong.
What’s more, you can be a customer of a bank and make use of fintech solutions as well. Since accounts with neo-banks are typically free to open and inexpensive to maintain, it’s a good idea to consider using them as an additional banking option. In fact, according to a study from EY, 56% of SMEs worldwide use fintech banking and payments services.
While the Hong Kong banking landscape may be difficult to navigate, it’s still recognized globally as one of the best places in the world to do business. So don’t let a bank hold you back.
About the Author
Elizabeth Ching is the PR & Content Manager at Neat, a fintech startup that provides multi-currency accounts for entrepreneurs, startups, and SMEs, as a modern alternative to a bank. Passionate about startups and entrepreneurship, her current goal is to help startups and SMEs get the tools and know-how they need to grow their businesses.