HK Bank Regulator Grants Eight Virtual Bank Licenses

Hong Kong's banking regulator has granted eight virtual banking licenses to financial operators so far this year, allowing them to operate branchless savings and loans businesses.

These moves increased the number of licensed banks in Hong Kong to 160, according to the Hong Kong Monetary Authority (HKMA).

Among 33 institutions that applied for the virtual banking license from the HKMA, Livi VB, SC Digital Solutions and Zhong An Virtual Finance were the first three to get the licenses. Then, WeLab Digital was granted the fourth licence in April.

Four more new licenses were offered to Ant SME Services (Hong Kong) Limited, Infinium Limited, Insight Fintech HK Limited, and Ping An OneConnect Company Limited. The four newly licensed virtual banks will launch their services within six to nine months in accordance with their plans.

Comparing to traditional banks, virtual banks are expected to be able to benefit the public by providing a lower cost but higher speed services with computer programs.

As such, unlike conventional banks, virtual banks can reduce expenses such as rent and employee’s payment. Recent research published by KPMG suggests that the operating costs of a virtual bank are only one-third of conventional banks or even less.

“For example, in the past, when you go to traditional banks for a $5000 loan, they may not lend to you because the amount is not enough to cover the cost. However, a virtual bank can as it minimizes the cost of human resource,” said Michael Liu, a foreign exchange broker and member of the New People’s Party.

A faster operation system can also improve service efficiency. “No more long queue for any banking services,” Liu added.

Branchless operations may attract more small depositors as virtual banks do not require a minimum deposit amount, unlike most traditional banks which will charge an extra fee if people cannot meet the minimum requirement.

Choi Wing Keung, a Hong Kong resident, said that he preferred to save his money in banks where there is no more minimum deposit requirement. "I think I may change to a virtual bank in the future. The minimum requirement of traditional banks has made me unable to use my bank account which is very inconvenient.”

However, virtual banks have to face the problem of account safety.

“Protecting customer’s data will be the most important and difficult mission for virtual banks,” said Liu. The reason why Hong Kong citizens are not interested in financial technology and other electronic payment method is that they don’t believe in technology, as internet crimes often happen in Hong Kong, he added.

“Credit card information can easily be stolen by others, and even the information review system is not rigorous,” Liu said.

Another concern regarding virtual banking is that the online operation system may not be user-friendly to the elder generation.

Ms Ng, a 63 years-old resident, said she didn’t know how to use the computer. “I prefer going to counter rather than using the ATM to take her money and transfer.” Ng believes that to solve the problem, virtual banks need to set a simple user interface for the elderly and reduce the difficulties for them to use the digital service.

Agnes Wu, an independent stock commentator, mentioned in her column that conventional banks should provide value-added or one-stop service to the customers, and cross-platform cooperation, changing the perception of conventional can only serve rich-household.

People also concerned about the background of virtual banks and those operators who got the licenses so far are backed by big financial institutions. For example, the main shareholders of Livi VB Limited are the Bank of China (Hong Kong) Limited, which own 44%. SC Digital Solutions Limited is owned by Standard Chartered Bank Hong Kong, which own 65.1% shares; ZhongAn Virtual Finance Limited is owned by ZhongAn Online P&C Insurance, which owns 51% shares.

《The Young Financial Post 新報人財經》



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