As the digital payment companies that offer cross-border payments are stacking on financial services to steal business from banks, HSBC is countering by adding a money-transfer app that could serve as a way to enroll new consumers.
HSBC on Tuesday announced Zing, a transfer app that will launch in the coming days in the U.K., with a wider rollout coming later. Zing is designed for users who do not have an HSBC account, enabling it to use the same approach as fintechs that are building "super apps," or using enrollment in payment accounts as a way to sell broader financial services.
The launch of Zing places HSBC in a market that banks have largely conceded to companies like Revolut and Wise. But as these nonbanks add more traditional banking and payment services, large banks are more inclined to compete with them — both to defend their existing businesses and to find new audiences.
"Cross-border is going to be a major battleground in payments in the next few years as economies strengthen and the globalization of commerce continues," said Thad Peterson, a strategic advisor for Datos Insights. "HSBC's solution is a 'shot across the bow' for players who want to compete for international transaction volume."
Zing will be available on Apple's App Store and the Google Play platform. Users will be able to store up to 10 currencies in digital wallets with locked-in rates to make payments in local currencies. Consumers can use more than 30 currencies to make international payments using a combination of local and Swift payments.
Zing is part of the global HSBC Group, but it is not a bank. It is licensed as an e-money institution by the Financial Conduct Authority. Zing funds are not deposits and as such are not insured by the Financial Services Compensation Scheme, the U.K.'s version of the Federal Deposit Insurance Corp. Anyone aged 18 or older can apply for the Zing card and app. HSBC already offers a fee-free multi-currency service to retail and wealth clients through its Global Markets product line, whereas Zing is meant to attract new users.
"A critical element is that Zing is open to non-HSBC customers, although they will obviously try to get you to sign up for their debit card," said Aaron McPherson, principal at AFM Consulting. "It is a crowded space, but there's definitely room for another competitor. I just think the group of banks that could do something like this is fairly small; maybe Citi and a few others. Most would probably want to partner."
The Zing launch follows several other moves at HSBC to expand its digital payments capabilities and to extend access to broader demographics. The bank recently invested $16 million in digital identity firm Yoti, which could help the bank streamline digital ID as a way to enroll new users and authenticate digital payments. HSBC also invested $10 million in Nova Credit, a firm that transfers credit bureau information between countries, making it easier for the bank to offer credit to immigrants.
HSBC did not provide an executive's comment by deadline. In a release, James Allan, founder and CEO of Zing, said: "Now is the time for a new kind of international payments solution; one that combines cutting-edge innovation with the support of a global bank."
International payments represent a huge and fast-growing market. Cross-border payments volume is expected to expand from $190 trillion in 2023 to $290 trillion in 2030, according to Statista.
There are a number of companies that offer cross-border payments. Wise has added partners with payment companies in different countries to make it easier for users to make payments in local currencies. Revolut, which has its roots as a mobile payment company, has added dozens of financial services over the past few years as it attempts to build a financial super app. Ripple has used the technology that supports the XRP token to offer cross-border payments for years, and recently rebranded its cross-border payments unit to address Ripple's attempts to build international networks for digital cross-border payment processing.
There are also traditional transfer services such as Western Union and MoneyGram that are adding partnerships and expanding their use of automation for their international payment businesses.
It can be challenging for traditional banks to offer digital cross-border payments, according to analysts. FX and cross-border remittance have long been markets that banks have been willing to cede to others, but as companies like Wise and Revolut have attached more banking-style features, especially cards, it's clear that banks are taking notice, said Aaron Press, research director for worldwide payment strategies at IDC Insights.
"Banks have a potential advantage if they can gain traction, which is far from guaranteed, as they won't have to share revenue with partners, which should improve margins," Press said.
Banks have struggled to match the FX pricing that the specialist startups offer, according to Gareth Lodge, a senior analyst for payments at Celent. "It's not that they can't, but more that they don't necessarily want to," he said.
There are several reasons for this. Banks may not have a risk appetite, or fear the service may cannibalize their own higher margin transactions or they may avoid the product because the smaller transaction size is not commercially attractive, Lodge said.
Getting into new lines of business can be a double-edged sword for banks, Press said. "There's a risk that the different investment needs, revenue models and margin expectations will be at odds with the bank's traditional metrics, which can cause challenges."
