HKMA to Rename ‘Virtual Bank’ to ‘Licensed Digital Bank’

HKMA to Rename ‘Virtual Bank’ to ‘Licensed Digital Bank’

by May 7, 2024

The Hong Kong Monetary Authority (HKMA) is set to replace the term “virtual bank” with “licensed digital bank” for the eight branchless lenders operating in the city to boost public confidence and eliminate negative connotations associated with the term.

This change aims to eliminate the negative implications associated with the term in Chinese, where ‘virtual’ can suggest ‘fictional’. Arthur Yuen Kwok-hang, deputy CEO of the HKMA, explained that the current Chinese translation might impact public perception negatively.

Arthur YuenHKMA Virtual Bank

Arthur Yuen

“The name change in English will align with the Chinese terminology, reflecting a more accurate depiction of these banks’ operations,”

said, Arthur.

This decision of HKMA to change virtual bank to a digital bank aligns with international trends where similar terminology has been adopted in Europe, Malaysia, and Singapore.

The rebranding is intended to clarify that these banks do not solely deal with virtual assets but offer a full spectrum of regulated banking services.

The consultation to gather public and industry feedback on this name change began on April 30 and will last one month. Several virtual banks, including Livi Bank, WeLab Bank, Mox Bank, and ZA Bank, have supported this initiative.

David Sun livi bank

David Sun

“Some members of the public thought virtual banks only offer services related to virtual assets,”

said David Sun, CEO of Livi Bank.

He believes that the renaming to ‘licensed digital banks’ will help clarify their regulated nature and business scope, facilitating easier community understanding and fostering industry partnerships in Hong Kong and the Greater Bay Area.

Robert Lee Wai-wang, a lawmaker representing the financial services sector, supports the HKMA’s proposal, highlighting the importance of accurate terminology in fostering growth within Hong Kong’s digital economy.

“The change will help the public to have a better understanding of the nature of these banks. Perhaps the regulators should also discuss whether they should change ‘virtual assets’ to ‘digital assets’,”

Robert said.

The virtual banks, licensed in 2019 and launched in 2020 during the COVID-19 pandemic, have thrived as traditional bank branches faced operational challenges. By the end of last year, these banks served 2.2 million customers, marking a 20 percent increase from the previous year, and saw deposits jump 23 percent to HK$37 billion, while loans rose 19 percent to HK$19 billion.

“These figures show the virtual banks have been growing well and the new generation of banks can compete with the traditional lenders,”

commented Arthur Yuen further on the financial performance.

He also noted the role of virtual banks in improving digital banking services among traditional banks and enhancing financial inclusion by offering more choices to retail banking customers and SMEs.

Featured image credit: Edited from Freepik