The Greater Bay Area is defined by connection

Around 87 million people live in the Greater Bay Area (GBA), which comprises the Hong Kong special administrative region (SAR), the Macau SAR, and nine cities in Guangdong Province. With a GDP of approximately USD $1.9 trillion in 2022, it’s one of the biggest economies in the world—and there’s still significant room for growth. Based on Bain & Company’s analysis of forecast data, the GBA’s GDP could hit USD $2.8 trillion by 2027. Although prolonged Covid-19 restrictions have slowed down GBA’s pace of development, there is a renewed momentum of cross-boundary travel and investment after the recent reopening.

Written in collaboration with

Written in collaboration with

At its core, the GBA is about connection. The government is bringing key cities together to create a technology, innovation, and e-commerce hub. A number of government policies have been implemented to increase mobility, recruit talent, and encourage cooperation and investment in the region. Specifically, the recent release of the Qianhai 30 financial measures helps facilitate the connection. Key measures include expanding the number of pilot banks to facilitate witness account opening, which helps Hong Kong residents open accounts at a mainland bank; exploring ways to strengthen digital innovation in Qianhai and pilot credit card remote signing; allowing Hong Kong banks in Qianhai to share the credit profile held by their parent banks in Hong Kong for the same Hong Kong resident; and supporting Hong Kong corporates and individuals to innovate and start businesses in Qianhai.

To learn how cross-boundary activity will affect retail financial services needs and preferences, Bain & Company surveyed more than 2,500 customers in the GBA at the end of 2022, before border reopening was announced. The result was compared against the similar research conducted in November 2020 to better understand how financial needs and preferences evolved.

Additionally, our research identified five key customer segments living in the GBA. Customers in the GBA have distinct financial needs, pain points, and preferences. We took a segment view to generate insights about their financial services needs and how financial institutions can address them.

Demand for travel across borders within the GBA is strong

With the increased interconnectedness, people are encouraged to live and work within the GBA, and customers’ personal lives and assets are becoming intertwined in the region.

In our survey, over 90% of mainland residents said they planned to travel to Hong Kong once Covid-19-related travel restrictions were relaxed (see Figure 1). Leisure and vacation are their primary motivations for travel, although mainland residents are also attracted to shopping and medical services in Hong Kong. Short-term demand for northbound travel is also strong, with around 70% of Hong Kong residents expecting to travel to the mainland within a year of the border reopening.

Figure 1

Significant cross-boundary movement was observed after the recent relaxation of restrictions. Upon the conditional border reopening on January 8, 2023, the number of both northbound and south­bound travelers more than doubled the December average in the restricted period. During the first week of full reopening since February 6, the average daily number of mainland residents entering Hong Kong and Hong Kong residents departing Hong Kong reached about 37,000 and about 137,000, respectively, an increase of more than 6 times the December average.

Over the longer term, retirement is another driver for cross-boundary travel. About one in five Hong Kong residents aged over 50 said they were interested in retiring to the mainland in more than five years’ time after borders reopened.

How demand for cross-boundary financial services has changed

Since our last study, “Are You Ready for the Financial Services Opportunities of China’s Greater Bay Area?”, changes in the macro environment have affected customers’ financial decisions. Prolonged Covid-19-related travel restrictions slowed China’s overall economic growth. Geopolitical tensions between the US and China, as well as the Russia-Ukraine war, also negatively affected the economy, which had a ripple effect on customers’ ownership and interest in cross-boundary financial products. The recent China reopening slightly improved the situation, but the ultimate effect of long restrictions remains to be observed.

Survey results show that the percentage of GBA residents that have already invested in cross-boundary wealth management and insurance increased compared to two years ago. More than 50% of mainland respondents either already own or are interested in cross-boundary financial products and services, while the number for Hong Kong respondents is around 30% to 35%. At the same time, forward-looking interest has decreased slightly—a drop that could be attributed to a variety of factors. Considering the vast population living in GBA, this remains a highly attractive addressable market in size; however, financial institutions need to come up with fresh ideas to regain momentum to tap into the full potential now that the border has been opened.

Since 2020, slightly more mainland customers have purchased wealth management, insurance, and loan products from Hong Kong (see Figure 2). Across product categories, mainland customers’ owner­ship and interest in cross-boundary products is higher for wealth management and insurance than it is for loan products overall.

Figure 2

Interest in Hong Kong-based loan products has been stable over the past two years. However, main­land customers who don’t currently own cross-boundary wealth management or insurance products have less interest in purchasing them within the next three years, compared to 2020.

Northbound purchasing behavior and sentiment were similar. Slightly more Hong Kong customers have purchased wealth management, insurance, and loan products from mainland financial services providers since 2020 (see Figure 3).

Figure 3

Like their mainland counterparts, Hong Kong customers’ interest in cross-boundary wealth manage­ment and insurance products also dipped since 2020. Overall, Hong Kong customers have higher ownership and interest in cross-boundary wealth management than insurance or loan products.

Customers’ needs and preferences changed over the past two years. In our research and interviews, customers shared these new expectations and explained how their interest levels for cross-boundary wealth management, insurance, and loan products have changed since the start of the Covid-19 pandemic.

Wealth management

Interest in cross-boundary wealth management services fell but is still healthy. Over a third of main­land customers are interested in buying cross-boundary wealth management products in the next three years. Nearly a quarter of Hong Kong customers expressed similar cross-boundary interests.

Ownership and interest in cross-boundary wealth management is even stronger among wealthier customers, as 64% of mainland customers and 46% of Hong Kong customers with assets over 1 million RMB or HKD are interested in or own cross-boundary wealth management products.

Customers on both sides of the border say volatile market conditions caused them to “play it safe” over the past two years, as they are more familiar and comfortable with products in their domestic market. Over the long term, this trend could steer customers away from riskier, high-return invest­ments and support better risk management and diversification.

Hang Seng Bank is addressing this trend by helping its clients navigate the market and find more balanced and diversified ways to invest. Rannie Lee, Hang Seng Bank’s head of wealth and personal banking, says the bank is providing its relationship managers refresher training to help customers review their portfolios. They can then propose solutions that help customers achieve their medium-and long-term goals.

Customers interested in cross-boundary wealth management expressed that foreign products are more attractive than domestic options. About 60% of mainland customers and 54% of Hong Kong customers believe cross-boundary wealth management products have better features. Mainland customers think Hong Kong providers offer more product options (e.g., global equities, foreign stocks, and bonds), while Hong Kong customers believe mainland providers offer better returns for products with the same risk levels.

Wealth Management Connect was launched in September 2021 to facilitate customers’ purchase of cross-boundary wealth management products. The program is still relatively new and with low ownership levels. Since its launch over a year ago, the total value of assets held across borders by north- and southbound Wealth Management Connect customers is about USD $95 million.

Despite low usage, interest in Wealth Management Connect is high. Interest is strongest among customers who already own or want cross-boundary products. About 80% of mainland customers and 60% of Hong Kong customers who own or are interested in cross-boundary products say they are interested in Wealth Management Connect. Half of those customers think the program could help them diversify risk by spreading products across different markets.

At the same time, the governments of Guangzhou and Hong Kong continue to drive progress on the required GBA wealth management market integration. On February 4, 2023, the opening ceremony for GBA (Nansha) cross-boundary Wealth Management and Asset Management Center was held in Guangzhou, marking the ambition to further improve the wealth management market environment and cooperation across the region.

Customers demand products from different asset classes with higher risk levels, and the ability to receive advice without traveling across the border for them to increase their purchase through Wealth Management Connect (see Figure 4). Current limitations on cross-boundary marketing make it difficult for customers to learn about products and reach out for expert advice.

Figure 4

“Many mainland customers are less familiar with wealth management products from Hong Kong. We are keen to offer relevant information, however, it is important for us to observe cross-boundary marketing guidelines,” explains Catherine Ko, head of customer propositions and management at Hang Seng Bank. She believes that if more communication and education can be made available to the investors, it could help customers feel more comfortable buying cross-boundary products. Peter Stein, CEO and managing director at Private Wealth Management Association, also shares a forward-looking opinion: “With the reopening of the border, the industry anticipates an increase in wealth management demand from mainland customers. To enhance the appeal of WMC, measures such as loosening product eligibility requirements, offering investment advice, and raising quotas should be considered to maximize the benefits of this closed-loop mechanism for GBA customers, enabling them to diversify their investment portfolios.”

If the governments implement more mature connectivity schemes that promote buying investment products across the boundary in five years’ time, mainland customers could increase the asset allocation to cross-boundary investment by 15%, and 10% for Hong Kong customers.

Insurance

Similar to wealth management, interest in cross-boundary insurance products decreased over the past two years. Previous travel restrictions posted a negative impact on insurance needs and severely limited customers’ ability to learn about or purchase policies in other regions.

With the drop in demand, many insurance agents that previously worked with cross-boundary customers moved into other jobs, which caused a loss of customer relationship. Rebuilding a trusting relationship with a new agent takes time, and by not checking in on customers’ protection needs, financial institutions could lose their sales opportunities.

After the recent border reopening, the number of cross-boundary travelers has been picking up quickly, leading to the expectation of recovery in the Hong Kong insurance industry. As Selina Lau, chief executive of the Hong Kong Federation of Insurers, says, “The insurance industry in Hong Kong has displayed a positive outlook following the reopening of the border. The MCV business is expected to pick up gradually. Insurance companies are also seeking to expand their workforce by hiring more frontline agents and back-office employees. However, this has proven to be a challenge due to high demand and limited availability of talent.”

Motivation for purchasing cross-boundary insurance varies between Hong Kong and mainland customers (see Figure 5).

Figure 5

About half of Hong Kong customers want mainland insurance to cover local needs (like healthcare) when they are in the mainland, while 43% of Hong Kong customers want to purchase insurance to place assets in the mainland.

As for mainland customers, more than half think that Hong Kong insurance products are more attractive and of better value. They say that Hong Kong policies provide better geographic coverage, with more transparent claim conditions. Mainland customers also use Hong Kong insurance policies for offshore asset allocation.

Unlike wealth management, there is currently no regulatory mechanism to support cross-boundary insurance sales. Hong Kong Chief Executive’s 2022 policy address emphasized the importance of a mutually accessible insurance market, and efforts are underway to establish after-sale service centers in Nansha and Qianhai. Insurers in the region anticipate that would allow Hong Kong insurance companies to provide premium renewal, claims, and policy inquiry services to mainland residents who own Hong Kong policies.

Mortgage

Ownership and interest in cross-boundary loan products are similar to 2020. In this survey, the majority of customers who expressed interest in cross-boundary loans were specifically interested in mortgage products.

Customers in Hong Kong expressed a desire to buy property in the mainland, where they can afford larger or “better” properties than in Hong Kong. With the falling property prices, respondents say that they are actively monitoring the housing market and preparing to buy, which explains the uptick in cross-boundary loan interest. They also want to be able to apply and pay for a mortgage on main­land property without leaving Hong Kong in the long run.

On the other hand, mainland customers who are looking for property in Hong Kong typically want to move closer to family members and friends, despite higher cost. With the ease of Covid-19 restrictions, customers traveling or relocating to Hong Kong for work already showed signs of recovery, with the potential to drive cross-boundary mortgage needs.

Five customer segments live in the GBA

We analyzed the survey responses and organized GBA customers into five distinct segments based on age, wealth, and familial status (see Figure 6). These five segments are important for financial institutions to understand as they develop, sell, and service financial products in the GBA.

Figure 6

Attractive segments for financial services providers

We extensively explored two segments: Affluent Families and Retirement Planners. These two groups have the highest average of investible assets per capita (> 1 million HKD) and have indicated high interest in cross-boundary investment (49% of assets for retirees and 40% for affluent parents, compared to mass of around 36%). Thus, on average, their willingness on cross-boundary investment is almost twice that of the third-ranking segment, making them the customer groups that represent the highest potential for financial services institutions.

Affluent Families

Affluent Families are pursuing careers, raising children, and taking care of aging parents. Because they can afford daily expenses, they are more focused on longer-term life and financial decisions. Their goals also require more sophisticated financial planning. For example, many Affluent Families pursue careers or retirement across the border and may expect their children to move abroad for education or work. These families are placing assets or investments in Hong Kong now so they can easily fund future activities abroad.

Since the pandemic, Affluent Families have used geographic diversification to manage risk. Some split their assets across the mainland and Hong Kong, while others moved assets outside of China entirely. On average, Affluent Families invest around 23% of their assets across borders within the GBA (see Figure 7).

Figure 7

To meet affluent customers’ financial needs, Hang Seng offers both investment and insurance products specifically tailored to customers’ risk tolerance and unique requirement of asset allocation and diversity. “The recent release of the Qianhai 30 financial measures will bring more opportunities to the GBA, and Hang Seng will leverage on our strong brand of ‘trusted wealth management bank’ in the GBA to provide the best services and solutions to GBA clients,” said Judy Qin, head of wealth and personal banking at Hang Seng Bank (China).

This segment also has significant, multigenerational insurance needs. Affluent Families need annuity products and health insurance to support their parents’ retirement lifestyles, on top of life, accident, health, and education endowment plans for their children and themselves.

Compared to other segments, Affluent Families in the mainland are also more likely to travel across boundaries to receive medical care. More than 30% of mainland Affluent Families say they will consider traveling to Hong Kong for medical resources and facilities in the future.

Real estate is often seen as an attractive investment opportunity for Affluent Families. Some Hong Kong residents have been monitoring property price trends in the mainland and think it is an opportune time to invest. They plan to rent out mainland properties in the short term to create a new income stream, while securing a place to retire in the future.

Affluent Families are savvier investors with more comprehensive financial needs. They are more willing to try a wide range of products, including cross-boundary products, which present more opportunities for financial institutions.

Retirement Planners

Customers preparing for retirement have important financial decisions to make, including where to live, what type of lifestyle they want to maintain, and wealth inheritance. Apart from proximity to family or friends, future medical needs are another consideration.

Hong Kong residents are attracted to the lower cost of living and falling property prices in the main­land, which allows them to purchase larger properties without depleting their savings. However, they are less confident about using mainland healthcare facilities because they didn’t contribute to China’s social security system, with quality being another concern. Customers perceive that Hong Kong has better quality healthcare than mainland China.

Healthcare is top-of-mind for mainland customers, too. Access to higher quality medical services is a top reason why mainland residents plan to retire in Hong Kong.

What financial services do Retirement Planners need? Beyond health and life insurance, Retirement Planners also need a steady source of income to fund their retirements and prepare for potential medical needs. That makes annuity products and investments with monthly or annual distributions popular. Mainland Retirement Planners put more than 30% of their assets in Hong Kong-based savings and investments—about 10% more than other segments.

In general, Retirement Planners prefer simple portfolios and low-risk products and are more cautious about cross-boundary investing. Some mainland respondents say they only invest in Hong Kong stocks and exchange-traded funds they are familiar with or have researched.

Interest in cross-boundary property is high because Retirement Planners want to purchase cross-boundary property to live in during retirement. This segment prefers to purchase property with money they have on hand, because they don’t want to divert a portion of their retirement income toward a large mortgage. However, if interest rates are attractive, Retirement Planners say they are willing to take out a mortgage and use passive income streams or investments for loan repayment.

How to serve customers within the GBA

One thing stays true across every segment: Digital and physical channels play an important role in the customer journey.

Digital tools make it more convenient for customers to research, buy, and use financial services products, yet customers still crave human interaction. In fact, customers prefer a blend of digital and human interaction. When asked about their top two preferred channels for cross-boundary financial services, more than 40% of customers picked one digital and one physical channel (see Figure 8).

Figure 8

Customers want to engage with a human to gain confidence and trust in an institution, especially for cross-boundary transactions. Communication does not have to occur face-to-face or in person. Social media communication tools help relationship managers connect with customers when borders are closed.

Customers expressed that they would like to know the person responsible for managing and growing their savings, and they are more inclined to trust the relationship manager’s recommendation than the information they find online.

Information and advice available online are slanted towards the positive aspects of financial products, according to customers. They believe a relationship manager can present a more holistic assessment of products and offer helpful advice about potential risks based on real experiences.

Professional recommendation is an important tool to build relationships between customers and financial institutions. Without a trusting, long-term relationship with a human, customers say they are much less loyal to the institution.

“Customers value interactions and engagements with our relationship managers and wealth experts. Nevertheless, our digital channel plays an important role to enable self-service for processes they are confident in,” says Kim Lay, head of digital banking at Hang Seng Bank.

Digital services are a critical touchpoint and a huge opportunity for financial institutions to make cross-boundary products more convenient and accessible to customers in the GBA. Over 40% of customers stress the importance of the ability to open accounts and initiate trades without crossing the border as one of their top-five purchasing criteria for using cross-boundary financial services.

Three ways for financial institutions to win business in the GBA

As the GBA continues to grow, cross-boundary travel resumes, and investment sentiments improve, customers in the GBA will have significant financial services needs. To win that business, financial institutions should invest in cross-boundary teams, develop segment-specific products, and deliver simple customer experiences (see Figure 9).

Figure 9

Become deeply familiar with customers’ needs and preferences on both sides of the border

To compete for cross-boundary business, financial institutions need to understand how customers differ on both sides of the border and adjust their service models accordingly.

For example, mainland customers prefer to speak in Mandarin Chinese and use WeChat for commu­nications, while English and WhatsApp are more popular in Hong Kong. Customers told us they feel more comfortable and secure when financial conversations are in their language. Having relationship managers that understand their needs and speak their language is an important step to build trust with cross-boundary customers.

Customers’ expectations from their relationship managers also differ. For example, mainland customers stated that they want ongoing communication with their wealth management experts and to receive proactive recommendations. They are also open to receiving financial news and analyses based on their portfolios, goals, or risk appetite. By contrast, Hong Kong customers prefer well-balanced advice with potential risks and downsides of different investment choices, instead of just product highlights or sales pitches. They want to have all the options clearly presented to them.

Financial institutions are advised to invest in ongoing research to learn how needs and preferences differ across borders and how they evolve. Local staff can lead sharing sessions to exchange insight, or staff can rotate between Hong Kong and mainland offices to gain first-hand experience.

Develop segment-specific products and services

One size does not fit all. Our research shows that customers in mainland China and Hong Kong pursue cross-boundary financial services for very different reasons. It is necessary to tailor products and messages for market- and segment-specific needs. Get to know your customer segments and serve them well.

For example, mainland customers want to buy Hong Kong insurance products for better product features, however they are less willing to spend half a day on insurance applications and medical underwriting, as they typically visit Hong Kong for leisure or vacation. To address such needs, Hang Seng Bank offers an insurance product available up to age 65, with guaranteed life coverage up to 200% of the premium paid, that does not require medical underwriting, which is unique in the market.

Consider Hong Kong Retirement Planners who want to relocate to the mainland. They want access to quality medical services, proximity to family and friends, with a steady stream of income. Could you offer a suite of products to meet all their financial needs?

To address customers’ needs for a steady income stream and advanced legacy planning, Hang Seng Bank recently launched a life insurance product with monthly income, withdrawal liquidity, and medical benefits, with the option to transfer the plan’s ownership for up to three generations to allow flexibility and legacy planning.

Financial institutions can also fulfill a range of cross-boundary needs, either by developing products or value-added services themselves or through partnership, joint ventures, and cooperative agree­ments. Through collaboration, financial institutions can connect customers to affordable retirement communities across the border. Or they can offer medical coverage in both regions to give customers more choices.

Deliver positive customer experiences across all channels

Digital tools were essential when border restrictions were in place, and their value will endure. To create a positive cross-boundary experience, financial institutions need superior digital tools and seamless integration with offline channels.

Over the past 12 months, mobile banking apps and online banking were the most-used channels, according to digital banking studies from Bain: 83% of mainland customers used mobile banking apps last year, and the mobile penetration rate in Hong Kong has reached 80% (For more information, see the Bain Briefs “How Retail Banks in China Can Elevate Digital Banking” and “How to Delight Digital Banking Customers in Hong Kong,” respectively.). According to the study, mobile banking experience has the highest correlation to positive overall customer experience, ahead of online bank­ing and traditional channels. Companies that manage to deliver a great digital experience will enjoy quantifiable benefits, such as increased customer purchases and reduced likelihood to switch to competitors. Hence, a delightful digital experience is becoming more critical to commercial success.

What makes a digital experience “good”? There could be some common needs, but the ultimate formula still varies by market and segment. In this research, the ability to open and manage accounts without crossing the border was a top purchasing criteria for cross-boundary financial services. In Bain’s digital banking study, Hong Kong customers said they value smoothness, clarity, and privacy in their mobile banking apps, while mainland customers want “super app” functionality.

Despite digital’s popularity, physical channels aren’t disappearing. Customers prefer physical or human interactions for recommendations, relationship building, and completion of significant transactions. Trust is paramount for cross-boundary financial services, and according to customers, trust is built most effectively through in-person channels.

Self-service tools are another aspect of digital experience, with the potential to delight (or frustrate) customers. Many customers are happy to manage their accounts digitally, as long as they can access human assistance when they need it. In a true omnichannel experience, customers don’t have to repeat processes in multiple channels. Their information flows smoothly across digital channels and to live agents, when needed.

Hang Seng Bank is an example of how financial institutions could create an integrated digital service experience. It provides witness account opening service, removing the need to physically cross the border for mainland customers under the Wealth Management Connect scheme. It also incorporated Cross-Border View & Transfer in its mobile app, allowing customers to seamlessly manage their accounts on both sides. When customers have cross-boundary mortgage or insurance needs, they would find a digital entrance, followed by physical interactions to guide them through the process.

Financial institutions need to clearly define the role of digital and in-person channels, as well as the relationship between them. This is critical to ensure financial institutions can deliver products and services when, how, and where customers want them. Financial institutions also need to decide how channels can be leveraged differently to develop strong, trusting relationships with customers.

Conclusion

As the GBA’s population and economy grow, so will demand for retail financial services. Customers in both Hong Kong and mainland China are eager to consider more wealth management, insurance, and mortgage options across borders.

Each product is tied to someone’s goals and dreams. Our research shows that GBA residents will need more financial products to help them pursue education, work, medical care, family, or legacy planning across borders.

To win business in the GBA, financial institutions need to tailor their offerings to customers’ motiva­tions. Product features and potential returns are important—but only as a means to fulfill much larger goals and dreams. Figure out what matters to customers first. Then, design products and protection to match.

Listen to customers. Continually monitor market sentiment to deliver products and services that match customers’ needs, risk appetite, and mood. Be transparent about risks to build trust and reassure customers.

The GBA presents an enormous opportunity for financial services providers that are able to deliver cross-boundary financial products that meet customers’ needs and preferences.

• Acknowledgments

  The authors would like to extend gratitude to all who contributed to this publication, especially Rannie Lee, Catherine Ko, Judy Qin, Kim Lay, Kelvin Lam, Florence Lam, Nancy Siu and Manki Yau from Hang Seng Bank, and Moritz Anstaedt, Jonathan Chan, and Zhewen Wei from Bain.

About Hang Seng Bank

Hang Seng Bank is celebrating its 90th anniversary this year. Founded in 1933, Hang Seng Bank has continually innovated to provide best-in-class, customer-centric banking, investment, and wealth management services for individuals and businesses. It is widely recognized as the leading domestic bank in Hong Kong, currently serving more than 3.5 million customers. Combining its award-winning mobile app and strong digital capabilities with a vast network of over 260 service outlets in Hong Kong, Hang Seng offers a seamless omni-channel experience for customers to take care of their banking and financial needs anytime, anywhere. Its wholly owned subsidiary, Hang Seng Bank (China) Limited, operates a strategic network of outlets in almost 20 major cities in Mainland China to serve a growing base of Mainland customers locally and those with cross-boundary banking needs. The Bank also operates branches in Macau and Singapore, and a representative office in Taipei. As a homegrown financial institution, Hang Seng is closely tied to the Hong Kong community. It supports the community with a dedicated program of social and environmental initiatives focused on future skills for the younger generation, sustainable finance and financial literacy, addressing climate change, and caring for the community. Hang Seng is a principal member of the HSBC Group, one of the world’s largest banking and financial services organizations.