Virtual Banking Moving Forward?

The Hong Kong Monetary Authority (“HKMA”) has issued three bank licenses and is processing another five. The minimum capital requirement at HK$300 million rules out many!  And these new banks are likely to snare up to 30% of the revenue of conventional institutions.

The rise of fintech start-ups has given birth to innovative technologies that can enhance customer experience, lower the costs of financial products and facilitate loans to consumers who otherwise may struggle to borrow from traditional banks. But many of these “banks” will find it difficult to justify a decent return. In comparison, U.K.’s banking regulators have set capital required at £5 million (USD6 million) – that encourages entry of niche players and start-up banks.

So Hong Kong is only for the big boys. But becoming a virtual bank allows taking of deposits, giving out loans with no physical branches. Virtual or direct banks have several advantages over conventional banks:

·       Higher interest rates and lower loan rates. Savings in infrastructure and personnel can be passed on to consumers;

·       Completely free checking accounts;

·       Convenience and mobility;

·       More advanced web technology; and

·       Environmentally friendly – no paper statement, no driving to banks and no additional premises for staff or operations.

Or course, some may feel there is a lack of relationship, especially from a personal contact but millennials have no problems with that!

Reference:

Hong Kong virtual bank license will be out of reach for all but a few, says fintech boss, Karin Young, SCMP