Differences Between MSOs and Traditional Banks

For those of you considering opening a company or have already opened a company in Hong Kong, setting up a bank account usually comes in second on the priority list after incorporation. Some may prefer a traditional brick-and-mortar bank with a history and credibility. In contrast, some may prefer fintech banks (also known as e-wallets) because of the relatively less complicated onboarding process. This article intends to go in-depth in comparing the pros and cons and the differences in the general onboarding process between the two.

Traditional Banks

Many people prefer traditional local banks because of their long history and reliability. Some of the most world-renowned and credible traditional banks in Hong Kong include The Hong Kong and Shanghai Banking Corporation (HSBC) and The Bank of China. It may seem enticing for foreigners to set up a corporate account with a traditional bank in Hong Kong, but the onboarding process can be complicated and time-consuming.

First of all, you must have business operations in Hong Kong or Mainland China, and you must provide the necessary supporting documents such as bank statements, expense receipts, and invoices within the last 3 months prior to submitting your application. In addition, you must already have an existing company outside of Hong Kong to prove the business nature of your Hong Kong company matches with the company in your existing company. Hence, aside from the supporting documents from your Hong Kong company, you must also provide the same from your existing company for initial screening. If the onboarding officers think your application fits the criteria, they will contact you directly for an in-person interview meaning you need to physically come to Hong Kong for that purpose.

Certificate of Incumbency

In terms of supporting documents, aside from bank statements, expense receipts, and invoices, you are also required to provide your company documents for further scrutiny. But there is a legal document that people seldom know about, yet it plays a crucial part in the bank account opening process as many banks nowadays require it as part of the screening process – Certificate of Incumbency.

The Certificate of Incumbency is a legal document not issued by an official body but by a third party, usually a service provider like a chartered company secretary or a lawyer. The document essentially displays the basic information of the company like the company name, incorporation date, company members, share capital total shares, etc. The document serves the purpose of validating the legitimacy of the company as well as the credibility of the company director to ensure one has the authority to act on the company’s behalf.

Neobanks

Fintech banking is also a population option among entrepreneurs especially for startups. In fact, most of our customers sign up with a neobank soon after they incorporated their company. The two most popular banking options at the moment are Airwallex and Payoneer. You can open a business account with them remotely free of charge. Both are regulated by the HK government with a Money Service Operators (MSO) license, and they can be used to receive and remit bank wire transactions worldwide. No initial deposit is required.

The onboarding process with neobanks is quite similar except it is less time-consuming. You are still required to provide your company documents (may not need to provide a certificate of incumbency, depending on the bank), a valid website with a history of at least 6 months, and monthly revenue of a minimum of USD $20K to sign up for an account linked with a payment gateway (Stripe/Shopify) which is what most people opt for when they sign up for an account.

Money Service Operators (MSO) License

The MSO license in Hong Kong is under the regulation of the Customs and Excise Department which differs from a regular banking license under the Hong Kong Monetary Authority. Generally speaking, the license is only good for two years and it solely permits money exchange institutions to operate as they are not allowed to offer investment schemes to their clients like regular banks.

However, they operate very similarly to traditional banks as they provide debit cards so clients can withdraw and deposit money as they wish. There is typically a transfer ceiling for these institutions. Typically, one can transfer up to USD 1 million a day depending on the institution.  As mentioned above, one can link their account with a payment gateway to ensure smooth transactional activities.

After you open a company with us, we can refer you to our designated officers from Airwallex and Payoneer for onboarding free of charge. If you are interested in incorporating a company with us in Hong Kong, please feel free to contact us by email at info@cheapincorp.com or WhatsApp at +852 5404 0902.