HK's First 'virtual Banks' To Open In Months

Hong Kong's first three virtual banks – offering services only online, with no physical branch networks – are set to begin operating this year, after the Hong Kong Monetary Authority granted licences.

The HKMA said it was also making good progress on processing five other virtual banking licences, and expressed hope that the new banks would help with the development of financial technology, or fintech, in the city.

The licences were granted to Livi VB – set up by BOC Hong Kong, JD Digits and Jardines; SC Digital Solutions – set up by Standard Chartered, PCCW, HKT and Ctrip Financial; and ZhongAn Virtual Finance – set up by ZhongAn Online and Sinolink Group.

Arthur Yuen, the HKMA's deputy chief executive, says there's enough room in the market for all three players, "given the capital they are putting in, and given a reasonable assessment of the leverage ratio for these kind of entities, the amount of business they are going to do in the first few years".

"Yes there will be some competition, but we think the market can comfortable absorb that kind of competition."

The virtual banks are expected to concentrate on retail operations, serving the public and small and medium-sized enterprises. The HKMA expects that they will not impose a minimum account balance or low-balance fees.

And despite their virtual nature and lack of branch networks, the banks would have some physical offices to interact with customers who had problems.

Hong Kong first launched a consultation on virtual banking as far back as 2000, but has since fallen behind the likes of Japan and the mainland, where virtual banks are already well-established.