Hong Kong’s new digital banks

Hong Kong Monetary Authority has granted licences to three virtual banks in the country that aim to disrupt the traditional banking system.

The banks are: Livi VB, co-owned by Bank of China (Hong Kong), JF Digits and Jardines; SC Digital Solution, a joint venture between Standard Chartered, HKT, PCCW and Ctrip; and Zhong An Virtual Finance, a joint venture between ZhongAn Online and Sinolink.

Norman Chu, chief executive of Hong Kong Monetary Authority said that the country has been trying to move forward with digital banking since 2017, saying, “A virtual bank licence is one of the seven measures to make Hong Kong advanced in banking.”

More licences are in the process of being issued, with applicants including WeLab and an alliance between Australia’s Airwallex, Bank of East Asia and Sequoia Capital.

Hong Kongers are showing a growing preference for using smartphone banking instead of visiting physical banks for their transactions with 68 per cent use their smartphones or tablets to check their banks accounts at least once a week, according to an Accenture study published on 22nd March.

What will happen to Hong Kong’s numerous traditional banks in the coming years? Fergus Gordon, a managing director at Accenture who leads its banking practice in Asia Pacific and Africa said, “There’s a big chance new players will grab a significant chunk of new financial services revenue in the near future in Hong Kong. But that doesn’t mean all is lost for traditional banks here.”

Gordon pointed out that the virtual banks will need time to establish themselves, and in the meantime, traditional players should continue to rapidly reconfigure their branch networks to become more focused on experiences. He added, “Understanding the different customer segments and how to best utilize technology to provide them hyper-personal services and products will be key for a successful banking strategy in Hong Kong. Given the level of satisfaction among consumers, there’s a huge opportunity for banks here to improve.”