Is WeLab Bank defying the odds?

Written by Kapronasia || July 01 2024

It is hard to believe that more than five years have passed since Hong Kong first approved virtual banks. The disruption that had been forecast has not come to pass and we wonder how much longer some of the online lenders will endure. Those backed by large public companies – which have to explain to investors why they are supporting unprofitable endeavors – could be the first to throw in the towel. That said, Hong Kong-based WeLab Bank, which is backed by billionaire Li Ka-shing, has seemingly defied the odds thus far with its performance. It says it is on a clear path to profitability and is expanding strategically in Southeast Asia.

Most Hong Kong virtual banks are struggling to make their businesses profitable, but WeLab Bank’s management told Hong Kong media in late June that it expects to be profitable in 2025. As of June, its customer deposits had tripled year-on-year to HK$6 billion. Tat Lee Ka-tat, WeLab’s CEO, says that the digital lender expects significant additional deposit growth this year, with a target of HK$8 billion by year-end. To be sure, this is a solid performance for a Hong Kong digibank – especially as some of them are confronting a growing problem of empty accounts –   but it also is not a threat to most incumbent lenders in the city. 

While Hong Kong is undoubtedly one of the region’s most important financial centers, the overall potential market is limited given that the population is small and well banked. For that reason, WeLab has business ventures in mainland China – though it does not directly operate a digital bank there – and Southeast Asia.

For that reason, WeLab is operating a digital bank in Indonesia together with Indonesian conglomerate Astra that has reportedly attracted 1 million customers since its Nov. 2023 launch. WeLab and Astra want to distinguish themselves from their many competitors by targeting a young professional demographic they describe as “solopreneurs,” including small business owners, freelancers, and full-time employees with side hustles. A study commissioned by Bank Saqu estimates that one in three Indonesians, or some 117 million people, will have multiple side gigs by 2030.

Meanwhile, WeLab plans to double down on Southeast Asia expansion by collaborating with conglomerates in Malaysia, Vietnam, the Philippines and Thailand. It seems that the nature of the business will vary by market. In Malaysia, WeLab is cooperating with HSBC. In Thailand, it is a technology partner of SCBX. It remains to be seen how WeLab explores opportunities in the Philippines and Vietnam.

While we tend to be skeptical of digital banks expanding rapidly overseas, in WeLab’s case, it appears that the focus is on strategic partnerships with established players that can benefit from the Hong Kong-based virtual bank’s technological capabilities. This type of calculated expansion in Southeast Asia could ultimately pay off for WeLab.