Virtual banking a reality for three

Top News | Gary Poon 28 Mar 2019

Three firms majority owned by BoC Hong Kong, Standard Chartered and ZhongAn Insurance were granted virtual banking licenses by the Hong Kong Monetary Authority yesterday.

But Tencent's Tenpay, Ant Financial and WeLab missed out in a licensing round that did not meet market expectations.

The Financial Times, for instance, had reported that at least seven licenses would be granted.

There was also a delay in the announcement, with some sources suggesting it should have happened two weeks earlier.

New company Livi VB, which is co-owned by Bank of China (Hong Kong), JD Digits and Jardines, won one licence, SC Digital Solutions, a joint venture between Standard Chartered, HKT, PCCW and Ctrip won another, and the third went to ZhongAn Virtual Finance, a joint venture between ZhongAn Online and Sinolink.

The three virtual banks intend to launch services within six to nine months, and another five virtual bank applications are being processed.

According to market sources, the delay was due to some applicants having to submit supplementary documents, while others were not granted licenses as the HKMA ruled their preparation work was lacking.

Arthur Yuen Kwok-hang, deputy chief executive of the authority, said it would issue the next batch of licenses after the first three virtual banks had operated for at least 12 months and reactions could be gauged and well as the state of competition checked.

He emphasized that the authority does not favor applicants with banking backgrounds, their partner companies or take into an applicant's capital sources.

Virtual banks would operate in Hong Kong in the early stages, and they would need HKMA approval to expand overseas.

As BoC Hong Kong sees it, Livi VB combines the strengths of its three shareholders.

Shareholder JD Digits "has strong capabilities in digital technology, online operations and technology innovation," it said. "Jardines has an extensive consumer footprint through its local and regional business network."

Standard Chartered said its joint venture would redefine the digital banking experience in Hong Kong by providing a suite of retail financial services and products.

The SC Digital Solutions operation is to be chaired by Mary Huen Wai-yi, chief executive of Standard Chartered Bank Hong Kong.

ZhongAn Online said the firm will invite users to participate in product development to help shape products or services that meet the Hong Kong customers' needs. The bank will be launched in the next six to nine months. With the granting of three licenses, the number of banks in Hong Kong will reach 155.

The Hong Kong Association of Banks believes the launches will foster fintech development in Hong Kong.

The association is also looking forward to the virtual banks joining the HKAB "to facilitate the development of the industry and enhance the competitiveness of Hong Kong's financial market."

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