Hong Kong grants first virtual banking licences

The Hong Kong Monetary Authority (HKMA) granted the first batch of three virtual banking licences, which permit banks to operate online in the city without physical branches, in March. It is the latest in a series of moves to help spark innovation in the city and strengthen Hong Kong’s position as an international financial hub.

The first three licences were granted to Livi VB Limited, SC Digital Solutions Limited and ZhongAn Virtual Finance Limited. According to their business plans, they intend to launch their services within the next six to nine months. The HKMA has since issued a further five virtual banking licences, bringing the total number of licensed banks operating in Hong Kong to 160.

Norman Chan, chief executive of the HKMA, said: “The introduction of virtual banks in Hong Kong is a key pillar supporting Hong Kong’s entry into the Smart Banking Era. It is a major milestone in reinforcing Hong Kong’s position as a premier international financial centre. I believe that virtual banks will not only help drive fintech and innovation, but also bring about brand new customer experiences and further promote financial inclusion in Hong Kong.”

The HKMA will closely monitor the operations of virtual banks after they have commenced business, including customers’ reactions to the new modes of delivery of financial services as well as the impact, if any, of these virtual banks on the banking sector in general. The HKMA expects to be able to conduct a comprehensive assessment of the situation about one year after the first virtual bank has launched its service.

Singapore is also set to enter the virtual banking sector. Tharman Shanmugaratnam, chairman of the Monetary Authority of Singapore (MAS), announced in June that five new digital bank licences were about to be issued. A digital-only bank will provide all its facilities online and through mobile or tablet applications, without the need for physical branches.

The new regime will comprise up to two digital full bank licences that provide for a wide range of financial services and allow deposits to be taken from retail customers. There will also be up to three digital wholesale licences for online banks that cater to small and medium-sized enterprises and other non-retail segments.

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