The Hong Kong Monetary Authority (HKMA) has issued an update on the development of digital banking or “virtual banks” (VB) in Hong Kong. The HKMA states that the establishment of regulated digital banking has achieved its three stated goals: promoting Fintech and innovation, creating a new customer experience (digital), and promoting financial inclusion.
At the same time, the HKMA says digital banking is gaining widespread consumer adoption, and the products and services offered by the approved banks have been well received by the populace.
The digital banks are said to have “contributed positively to the banking sector’s Fintech adoption and innovation.”
Eddie Yue, the HKMA’s chief executive, said the current number of approved virtual banking licenses is “optimal” and there is no need to add new entrants to the sector.
As at the end of 2023, the digital banks reported a total number of 2.2 million depositors. The collective market shares of the digital banks among all retail banks in Hong Kong in terms of the total number of depositors increased to 8.8% in 2023.
At the end of 2023, the digital banking sector’s total assets reached HK$49.9 billion, total loans and advances reached HK$19.5 billion, and customer deposits reached HK$37.5 billion.
The sector’s operating performance continued to improve, with aggregate operating income increasing sevenfold and net losses narrowing by 15% from FY2021 to FY2023.
Some of the digital banks have commenced wealth management and insurance intermediary services, with six digital banks being Registered Institutions engaging in securities business and three banks being Licensed Insurance Intermediaries as of end-July 2024.
The HKMA notes that increasing exposures to and dealings with business entities, including the digital asset related sector and the Web3 ecosystem, the current requirement that a digital bank should primarily deliver retail banking services is considered no longer appropriate or necessary and will therefore be removed.
The Hong Kong Digital Banks are as follows:
- Airstar Bank Limited
- Ant Bank (Hong Kong) Limited
- Fusion Bank Limited
- Livi Bank Limited
- Mox Bank Limited
- PAO Bank Limited (formerly known as Ping An OneConnect Bank (Hong Kong) Limited)
- Welab Bank Limited
- ZA Bank Limited March
The HKMA has launched a consultation on switching from the Virtual Bank label to a Digital Bank to align with global norms.
The HKMA report on digital banks is available here.
