A Brand New Experience with Virtual Banks


18 Dec 2019

A Brand New Experience with Virtual Banks

Ever since the HKMA granted licences to eight virtual banks in the first half of the year, many have been wondering when these new members of the banking industry will commence business. We are delighted to note that the first virtual bank has started its trial run today in the HKMA’s Fintech Supervisory Sandbox, thanks to the diligent efforts of various parties. This not only suggests that Hong Kong banking customers will soon be able to experience more innovative banking services, but also marks a major milestone in the development of Hong Kong’s banking industry. Let me take this opportunity to share with you the main features and future development of virtual banking.

The market is looking forward to the rollout of the eight virtual banks. What are the main differences between virtual and conventional banks? What can the public expect to see?

The HKMA encourages the development of virtual banks, as it can help promote financial innovation, enhance customer experience and facilitate financial inclusion. The mode of operation and service delivery of virtual banks therefore differ greatly from those of conventional banks. For example, virtual banks do not have physical branches and instead deliver all services via the internet; nor do they impose minimum balance requirements or low-balance fees on customers.

Retail customers and small and medium-sized enterprises are the target customers of virtual banks. To start off, the virtual banks plan to provide basic banking services such as deposits, loans and inter-bank transfers. We believe that as virtual banks gain a better understanding of their customers’ preferences and habits over time, they will leverage financial technologies to offer more personalised products and services, and a new user experience to customers.

What do the public need to be alert to when using virtual banking services?

While both virtual banks and conventional banks are obliged to handle customers’ information properly as required by the HKMA, members of the public should still exercise due care when using digital banking services and safeguard their own personal information. Virtual bank users should keep their account passwords safe and change passwords regularly. They should never log in to their internet bank accounts via an unknown Wi-Fi service or a public computer. It would also be wise for users to pay attention to notification messages received from their banks via SMS, and to contact their banks immediately if they suspect that their personal details have been stolen.

The HKMA has put in place a number of regulatory requirements on virtual banks regarding technology risk management and data processing, and requires virtual banks to obtain verification of their compliance by an independent third party. In the past few months, much work had been done on internal testing and preparations, as well as contingency plans for potential operational risks on the part of the virtual banks. While the groundwork has been meticulous, it may be unavoidable that some teething issues arise. After all, a virtual bank is a brand new institution operating in a brand new way amid the ever-changing challenges of the real world. Should any unexpected issues arise, the virtual bank concerned should of course address them quickly and properly. At the same time, we also hope the public can demonstrate understanding.

During the trial run of a virtual bank, the HKMA will closely monitor its operation and communicate with the bank which will make adjustments when necessary. If the outcome of the trial run is satisfactory and the HKMA is satisfied that the virtual bank meets all the relevant regulatory requirements, the virtual bank will be allowed to formally launch its business. As set out in the HKMA’s Guideline on Authorization of Virtual Banks, we will apply the same set of supervisory principles to conventional and virtual banks alike, and endeavour to ensure the robustness of virtual banks’ operations.

Is there a blueprint for the future development of virtual banks?

The market has shown keen interest in virtual banks. Since the eight virtual bank licensees were announced, quite a few other institutions have approached the HKMA and expressed an interest in applying for a new licence, suggesting strong market confidence in the industry’s prospects. We will monitor the operations of the virtual banks, user response, the level of market acceptance and the impact on the banking system before carefully planning the next steps for further development of the virtual banking industry.

It is worth noting that the first virtual bank which rolled out its services today has announced the specific arrangements for its trial run, involving some 2,000 interested members of the public as the first batch of users. We believe that the bank will carefully review and address feedback from the participants in order to improve its products and services, and get better prepared for its formal launch.



Arthur Yuen
Deputy Chief Executive
Hong Kong Monetary Authority

18 December 2019

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Last revision date : 18 December 2019