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Milestone in our Banking Industry
In view of the rapid development in innovation and technology, I proposed in the past two Budgets to expedite the promotion of Fintech in Hong Kong. I am pleased that the Hong Kong Monetary Authority (HKMA) granted three virtual banking licences last week, which marks a new era of Hong Kong’s banking industry in providing more diversified, more convenient and more advanced services.
The objective of government policies is always related to better serving our people and bringing convenience to them. The introduction of virtual banks can help promote financial inclusion and enhance user experience.
The banking sector has all along been a vibrant industry in Hong Kong. In recent years, many banks have strengthened their internet and mobile services. However, in certain aspects, the local banking industry has yet to get past the “last mile” in the provision of customer service. For example, taking into account operating cost, fewer banks are willing to set up branches in relatively remote areas, bringing inconvenience to residents in those areas. And with the same consideration, many banks impose requirements and charges on minimum account balance, which is not desirable to the public at large, in particularly grassroots customers.
Since the operation model and cost structure of virtual banks are different from that of traditional banks, they would have different considerations in calculating their returns. For example, virtual banks do not need to set up physical branches, and hence can make use of the savings in operating costs to rebate customers and increase their attractiveness to different customer groups. In fact, according to the requirements by HKMA, virtual banks are not allowed to impose any requirements and charges on minimum account balance. This implies that our citizens will be able to receive basic banking services disregard of their salary, wealth and address. Small depositors will be provided with more options as well.
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Besides, technological breakthrough in biometric authentication, artificial intelligence, big data and robotic learning would turn impossible banking processes to possible. Take opening account as an example, customers can now make use of mobile apps for remote account opening. The verification of identity can be done by scanning identity cards via mobile phone, uploading a selfie, and providing personal information. Processing at physical bank branches is no longer required.
We learnt from other regions’ experience that, apart from promoting financial inclusion and bringing convenience, the introduction of virtual banks can also enhance customer experience. What virtual banks provide is more than banking services. It is a combination of banking services and living experience. You may note from the press release of the licenced virtual banks that they are going to complement the everyday lives of consumers with flexible banking solutions, including entertainment, linking up online and offline services, etc. With the introduction of virtual banks, we expect that customers will receive a broad spectrum of brand new service experiences.
At the same time, I must emphasise that our role in bank supervision and deposit protection of the public would not be compromised in any way. License holders of virtual banks must complete a series of preparatory work to fulfil the regulatory expectations before operation. HKMA will also follow up the preliminary work closely, including assessment on technological platform and system, implementation of risk management and control details, set up procedures for remote account opening and anti-money laundering and counter-terrorist financing, etc. According to their business plans, these three newly licenced virtual banks are expected to launch their services within 6 to 9 months. HKMA will continue to process the remaining five virtual banking licence applications.
Fintech has been developing rapidly in Hong Kong in the past one plus year. Our determination in promoting Fintech is reflected through the launch of the Faster Payment System and eTradeConnect (a blockchain-based trade finance platform), the issue of licences for virtual insurers, and the new regulations by the Securities and Futures Commission over virtual asset funds. In future, we will continue with our efforts in utilising innovation and technology to enhance the standard and competitiveness of our financial services, and to promote the leading status of Hong Kong as an international financial centre.
31 March 2019
