Hong Kong’s banks, from new digital lenders to traditional powerhouses of the sector, are in a price war to lure 7 million Hong Kong permanent residents into using their platform to get their HK$10,000 (US$1,290) government cash handout.

Newly-launched virtual lenders like Airstar and the three note-issuing banks, HSBC, Standard Chartered, and Bank of China Hong Kong, have entered the fray, offering high interest rates, lucky draw prizes and other incentives.

The HK$71 billion of payouts announced by Financial Secretary Paul Chan Mo-po in February’s budget is aimed at helping people cope with the economic slump caused by the Covid-19 pandemic and a year of anti-government protests. Bankers, however, are taking it as an opportunity to compete for new customers.

People can register through one of 21 banks from June 21 until the end of this year to get their hands on the HK$10,000, with the money due to be paid into their registered bank account from July 8.

HSBC, the largest lender in the city, is offering a 10 per cent interest rate on up to HK$50,000 of savings for two months for new customers who open an account via its mobile phone app, until the end of July. It will also offer a lucky draw for customers who register for the government payout via its platform, but details will only be given next week, according to a spokesman for HSBC.

BOCHK is offering a 4.3 per cent interest rate for three-month time deposits of up to HK$100,000 for new customers who use mobile banking to open a new account.

Normal saving deposit rates in Hong Kong are close to zero, while time deposits are only between 1 and 2 per cent.

Lucky draws for cash prizes have emerged as a theme for the banks competing for customers to sign up for the government payout. Standard Chartered is offering an extra HK$10,000 cash for each of 24 winners, Hang Seng Bank is offering 9,000 people the chance to win HK$20 each, while five will get HK$10,000. Bank of East Asia is offering 31 customers prizes between HK$1,000 and HK$10,000.

Citibank is enticing customers with HK$68 cash for anyone registering with it for the government payout. It will also give HK$100,000 to one customer in a lucky draw, the highest among all banks.

Brand new players have also joined the game. Airstar, a joint venture virtual bank led by mobile phone maker Xiaomi, started full operations on Thursday. It is offering a 3.6 per cent savings rate on up to HK$20,000 for new customers.

WeLab Group, an online lender, last month offered a HK$10,000 loan to borrowers, free of charge provided they agreed to repay it once they receive the government payout. Co-founder and chief executive Simon Loong said about 70 per cent of its 4,000 applicants are new customers.

“This is a good opportunity for Hongkongers to try the new online banking services,” Loong said.

New players coming to the market with compelling saving rates will follow this with attractive loan offers, James Lloyd, a partner at advisory firm EY, predicts.

“As incumbent players respond in kind, we expect to see some capital transfers and net interest margin compression. Ultimately, the challenge for both new and existing players will be how to generate account loyalty without engaging in a never-ending price war,” Lloyd said.