The Hong Kong Monetary Authority (HKMA) has published the results of a consultation on changing the term “Virtual Bank” to “Digital Bank,” joining most of the rest of the world. Hong Kong has been a progressive jurisdiction when it comes to embracing the digital banking revolution.
In brief, a digital bank is an approved banking institution that operates like a traditional brick-and-mortar bank minus the costly real estate and employees. A neobank, on the other hand, is a platform that offers bank-like services, sometimes in partnership with a regulated bank or using bank-adjacent rules to provide services. A neobank does not hold a bank charter.
Announced some time ago, the consultation received 26 commentary submissions on the decision. The majority approved the decision to shift branding from virtual to digital, with all five institutions agreeing with the change.
The HKMA stated:
“Taking into consideration the comments received, the HKMA considers that it is appropriate to rename “Virtual Bank (虛擬銀行)” as “Digital Bank (數字 銀 行)” to put more emphasis on the business models and financial technologies adopted by the VBs rather than their form of presence. The suggested Chinese name “數字銀行” is deemed appropriate as it aligns with industry trends and current digitalisation terminology used by the Government in policy development while providing distinction with the existing digital banking services of the incumbent banks, which are usually translated as “數碼銀行服務””
Ronald Iu, CEO of ZA Bank, one of the leading Hong Kong digital banks, shared a comment on the decision:
“We welcome the completion of the HKMA’s consultation on the renaming of ‘Virtual Bank’, and are pleased to see broad support from both the industry and the public that the name ‘Digital Bank’ more accurately reflects the nature of our services. We believe that this new name will help address misconceptions and enhance public awareness of how digital banking works.”
Iu noted that ZA had recently become profitable with “impressive interim results”
“This positive momentum underscores the industry’s shift towards sustainable profitability and robust business models. It also fosters a more stable and reliable image for the industry, further enhancing our competitiveness and boosting public confidence in digital banking.”