66% of the all retail banking loans in Hong Kong, and an even larger share of credit cards and retail mortgage loans banking market in Hong Kong is dominated HSBC, Bank of China Hong Kong, Hang Seng Bank and Standard Chartered, according to Goldman Sachs. But all that is set to change as Hong Kong seeks to open its banking market to online competitors. The government poised to issue digital banking licenses to six firms including internet and gaming group Tencent, Ant Financial, the payments business of e-commerce giant Alibaba, smartphone maker Xiaomi and insurer ZhongAn. Analysis by Goldman Sachs indicate that the influx of competition is likely to impact the $15bn (or two-thirds) of annual retail banking revenues of banks such as HSBC and Standard Chartered that have been shielded from competition for decades. The advantages of access to online banking includes an increased range of digital products and services and greater control of personal data by customer. The move seeks to alleviate concerns about the negative impact of a lack of sufficient competition - for example, just 53 per cent of Hong Kongers were satisfied with bank services last year, according to a survey by consultancy Accenture, compared with 88 per cent in the US and 78 per cent in the UK. Complaints include slow, clunky online banking, a lack of clarity about fees, the difficulty of opening accounts and generally poor customer service.

5.1 Does competition in the financial services sector matter? Why or why not? (13 marks) 5.2 What barriers to entry exist the banking industry? (12 marks)