TOP STORIES

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. Digital banks, which deliver banking services exclusively or primarily through the internet or other forms of electronic channels, are subject to the same set of regulatory requirements that apply to traditional banks according to HKMA. The eight licensed digital banks of Hong Kong 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. Total deposits of the eight banks amounted to 2.2 million at the end of 2023, accounting for 8.8% of the total depositors in Hong Kong and reported zero profits according to HKMA. 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. 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 …