Branching Off - The Outlook for Hong Kong's Virtual Banks


Hong Kong has been fortunate that a forward-looking regulator, the Hong Kong Monetary Authority, has facilitated a series of policy (Smart Banking Initiatives – September 2017), infrastructure (Faster Payments – September 2018) and regulatory initiatives (new Stored Value Facility Licences from August 2016 and Virtual Banking Licences) benefiting both new entrants and existing financial services providers.
Hong Kong’s is uniquely positioned as a global financial centre bridging Mainland China (the world’s largest and most innovative TechFin market) with the rest of the world’s well established financial services organisations and global FinTechs.

Hong Kong has a tradition of digital innovation in financial services to support the community, including the homegrown Octopus card, which has pioneered world-leading ease of use across transport payment and low value payments since the late 1990s. Octopus exported its system and expertise around the world, including the Netherlands, Dubai, and New Zealand.

The three note issuing banks – HSBC, Standard Chartered, and Bank of China – have each responded to the rise of digital services with new innovations, such as HSBC’s fully online IPO (MTRC) in 2000; the IDEO designed Standard Chartered Breeze Mobile Banking application in early 2010’s, and Bank of China’s BoCPay application allowing QR payment in the Greater Bay Area. These “incumbents” have proved remarkably nimble in launching PayMe, Mox Bank, and livi respectively to counter the new entrants from such TechFin leaders as Ant Financial, Tencent, Ping An, and ZhongAn.

The combination of a forward-looking regulator and a culture of professionalism and innovation has nurtured Hong Kong’s retail and small business FinTech start-ups, with one ‘unicorn’ (a privately held start-up worth over USD 1 billion), WeLab. The WeLab Group sets a notable precedent of expanding from Hong Kong to Mainland China and into the region.

Following HKMA’s issuance of first the new Stored Value Facility Licences and then the eight Virtual Banking Licences, Hong Kong individuals and small businesses have benefited from new financial service providers and improved existing banks’ offerings, heralding, just as the Hong Kong Monetary Authority had hoped, a ‘New Era of Smart Banking’.

In welcoming this report on the anniversary of the arrival of virtual banks, the FinTech Association of Hong Kong looks forward with positive anticipation to further innovation, collaboration, and benefits that such a vibrant and dynamic FinTech community will bring.


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