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Following the successful launch of eight virtual banks in 2020, the Hong Kong Monetary Authority (HKMA) is now focusing on how to encourage digital laggards among small and medium-sized lenders to innovate their existing processes.

According to the South China Morning Post, HKMA’s chief executive Eddie Yue Wai-man warned that a refusal to digitise from small players may result in their “being left out in the future”.

More specifically, incumbent lenders will be required to report their digitisation plans – including specific timelines and goals – to the HKMA. Mr Yue said that HKMA staff will go as far as discussing each bank’s digital project roadmap for the next three to five years, while helping to connect lenders with specialised RegTech providers.

Since becoming fully operational in 2020, Hong Kong’s eight virtual banks – which don’t have any physical branches – have already attracted 420,000 customers and HK$15 billion (US$1.93 billion) of deposits. Financial consultancy firm Quinlan & Associates anticipates that the eight new players will generate up to HK$76 billion per year by 2025, capturing a combined market share of 19.3 per cent.

Mr Yue also remarked how the release of Hong Kong’s virtual banking licenses has been followed by similar initiatives in Singapore and Malaysia.

Interestingly, ahead of virtual banks’ market entrance, traditional financial institutions in the city modified some of their long-standing requirements to get ready for the competition. HSBC and Standard Chartered Bank, for instance, removed the minimum balance requirement and lowered some fees in August 2019. “By imposing no minimum account balance requirements and levying no low-balance fees, virtual banks have also helped to make banking and financial services more accessible and inclusive”, said Benjamin Quinlan, chief executive and managing partner of Quinlan & Associates.

At Know Your Customer, we specialise in providing client onboarding and digital KYC solutions to financial institutions in Hong Kong and around the world. Contact us to discover how our award-winning technology can support your bank’s digital transformation objectives.

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Last updated on May 9th, 2024 at 10:16 am

Claus Christensen

Claus Christensen is the CEO & Co-Founder of Know Your Customer. His vast array of previous experiences includes founding a technology company that develops email server infrastructure products for 60,000+ global customers and serving as VP Electronics at Thielert Aircraft Engines. A regular contributor to leading industry publications and a recognised expert in the anti-money laundering and financial regulation space, Claus is also the host of the RegTalks podcast and a senior lecturer of the Centre for Finance, Technology and Entrepreneurship (CFTE)’s RegTech Course.