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Hong Kong Fintech Week 2024: Virtual banks call for customised policy rollout to enhance competitiveness

Hong Kong's virtual banks need more regulations that would make them more competitive compared to the conventional brick-and-mortar banks, the experts said on Tuesday.

"HKMA treats us the same as traditional banks, and its policies are based more on the status quo of traditional banks, which took a lot of our time and manpower and affected our normal business operations," said Tobie Marais, the head of the Information and Cyber Security of Mox Bank, in the Hong Kong Fintech Week.

Marais's call follows the latest decision from the Hong Kong Monetary Authority to stop issuing licences for branchless banks in August, which will give the city's current eight virtual banks more space to grow.

The eight licensed digital banks together gained HK$49.9 billion in assets last year, which accounts for only 0.3% of the total market shares, according to the HKMA's data.

Paul Tang, the chief operating officer of Payment Asia, thinks virtual banks are facing competitive pressure as many traditional banks are also on the way to digitalisation.

Paul Tang, the chief operating officer of Payment Asia, echoed the proposal that virtual banks need more pertinent regulations to support their business expansion in the short term.

"The investment cost of virtual banks is high in the early stage, while the operation mode is also different from traditional banks," said Tang.

The virtual banks in Hong Kong were established with the mission of stimulating more innovations, fintech adaptations, and competitiveness. Nonetheless, all eight licences haven't started to make profits and have to follow the exact requirements as brick-and-mortar banks, according to the city's de facto central bank.

Hong Kong virtual banks lost HK$1.28 billion in the first half of 2024, marking a 14% decrease compared to the same period in 2023, according to the banks' financial reports.

Virtual banks, such as Air Star, provide up to 6.88% of annual interest rates, offering higher interest rates to attract people's deposits.

"Digital banks are different from traditional banks, so old ways don't fit. Only with new policies can digital banks leverage their unique advantages," said Oliver Hughes, Head of International Business at TBC Bank Group, highlighting that virtual banks in Hong Kong expect new regulation to support them as they compete with traditional banks.

"We try to remove that (the obstacles faced by the digital banks)," said Alvin Li, Head of the Supervisory Technology Division of the Banking Supervision Department at the Hong Kong Monetary Authority, in a seminar about the digital banking industry. The conference, a satellite event of Hong Kong FinTech Week, was organised by The Hong Kong Association of Banks and supported by the School of Communication of HKBU.

Li mentioned that HKMA is adopting an interactive approach to work with the industry to balance risk management and innovation needs.

Tan Wei, ambitious to realise cross-border global financial services, is a senior solution architect at Ant digital technology business group.

Besides the regulations, virtual banks with a Chinese capital background in town, such as the Ant Bank, are still not very familiar with the Hong Kong market, and they lack communication with the city's financial regulators, according to Tan Wei, the senior solution architect at the Ant digital technology business group.

"HKMA takes advice from big banks or consulting firms when it comes to formulating policies. "he added, "We hope that our needs can be heard, too."

 

《The Young Reporter》

The Young Reporter (TYR) started as a newspaper in 1969. Today, it is published across multiple media platforms and updated constantly to bring the latest news and analyses to its readers.

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