First: ZA Bank Ltd. Pilots Digital Banking Solution in Hong Kong By Offering Services to 2,000 Retail Users

ZA Bank Ltd. is reportedly testing internet-only banking solutions in Hong Kong, which notably makes it the first organization to provide such services in the city as the Asian financial hub continues to promote the development of Fintech-related projects.

The Hong Kong Monetary Authority began accepting applications for a “virtual bank” license at the end of 2018. So far, 8 separate entities have been approved to offer digital banking services with more expected to follow.

ZA Bank is managed by China’s online insurance firm ZhongAn Online P&C Insurance Co. Ltd. (6060:HK). The pilot program, which began on December 18, offers digital banking services to around 2,000 retail users ahead of a planned full product launch.

In August, ZhongAn said ZA Bank “has opened the door to a new business segment.” The company added that ZA Bank will “make use of its proprietary technologies and big data capabilities to create innovative online financial products and services that cater to the needs of the local Hong Kong users.”

ZA Bank’s management says that its services presently include remote account opening, internet-based funds transfers and multi-currency savings accounts.

Among Hong Kong-listed Zhong An’s primary stakeholders and founders are entities associated with Chinese tech giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd.

The pilot will be performed under a Fintech supervisory sandbox program of the Hong Kong Monetary Authority (HKMA). As part of the trial, the city’s de facto central bank will give permission to ZA Bank to conduct business in an environment that has been separated from the larger capital markets. This will help the HKMA in identifying potential technological risks, such as data security vulnerabilities.

If the pilot is successful and satisfies relevant regulatory guidelines, then the digital bank will be allowed to offer services to the city’s residents, Arthur Yuen, deputy CEO at the HKMA, confirmed.

Unlike regular brick-and-mortar financial institutions, digital banks only offer products and services online, which may lead to greater operational efficiency and many customers might find it more convenient. ZA Bank noted that its clients would be able to open a new bank account within minutes and would be able to conduct transactions easily using facial recognition.

Founded in August 2018, ZA Bank is notably among eight companies that were issued digital banking licenses from the HKMA earlier this year. Seven of these firms are reportedly funded by financial or internet giants based in mainland China. Digital banking services are projected to lead to the development of various other Fintech-focused products and services in the foreseeable future.

The other regulated digital banks include an institution supported by Inc., a divsion of Alibaba’s Fintech subsidiary Ant Financial Services Group, a Tencent led joint initiative,  and a firm funded by smartphone-manufacturer Xiaomi.

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