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On March 27th, 2019, the Hong Kong Monetary Authority (HKMA) announced it issued its first batch of virtual banking licences.

The financial institutions that were granted the licence to operate in the form of a virtual bank under the Banking Ordinance are Livi VB Limited, SC Digital Solutions Limited and ZhongAn Virtual Finance Limited.

The key element that differentiates “virtual” banks from “traditional” banks is that these firms are not required to set up physical branches, but they can still operate as a bank, being able to accept deposits and issue loans.

This is the latest move in HKMA’s plan – announced in 2017 – to foster a positive environment for FinTech development, while driving improvements in customer experiences and promoting financial inclusion in Hong Kong.

Hong Kong customers appear especially keen to embrace digital banking solutions, which makes the HKMA’s decision to grant virtual banking licences all the more relevant. In particular, according to a recent Accenture survey of 47,000 people in 28 markets, 63% of Hong Kong respondents bank online through their mobile device (to put things into perspective, the global average is 54%).

The most important challenge that the newly established virtual banks will face is how to quickly establish long-term trust to drive adoption among consumers. Our CEO Claus Christensen recently explored on Finextra the role that RegTech companies can play in helping digital banks build that trust every step of the way, making the most of each touch point and digital interaction with their end customer.

At Know Your Customer, we specialise in helping both traditional and digital-first organisations build seamless, secure and efficient on-boarding experiences for their customers.

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