It took six years, but Hong Kong’s virtual banking scene has officially crossed the threshold from proof of concept to proof of economics.

The industry has achieved the milestone that investors and regulators have long been waiting for: profitability. WeLab Bank and ZA Bank both broke into the black in the first half of 2025, validating their operating models in one of Asia’s competitive and tightly regulated financial markets.

This breakthrough arrives as digital banks demonstrate robust user adoption. According to a recent survey by the Hong Kong Association of Digital Banks, over two years, 66.4% of individuals and 63.7% of SME users have continuously relied on these platforms, with a high proportion meeting at least half of their daily banking needs digitally.

Furthermore, the public and SMEs overwhelmingly agree (92.7% and 99.4%, respectively) that digital banks are more forward-thinking than incumbents in adopting AI technology. Gigi Wong, spokesperson for the HKAB Digital Banking Education Tasksforce, shared,

“As the user base continues to expand, the industry has also begun to achieve profitability, further validating the sustainability of this operating model.  As digitally native financial platforms, we firmly believe that digital banks hold immense potential in areas such as AI applications, data analytics, and smart financial management.”

For the segment’s many watchers and stakeholders, this moment marks a critical point.

The new question for the industry is no longer can virtual banks survive, but rather: what does a virtual bank do next to dominate?

WeLab Bank and Its Drive for AI

WeLab Bank’s success offers a strong look at how a digital bank can scale while keeping credit risk firmly in check. The bank attributes part of its performance trajectory to its growing use of AI, which it began integrating more actively in recent years.

This strategy allowed the bank to reach profitability, reporting revenue of approximately HK$460 million in H12025, a significant Y0Y increase of roughly 70%.

The core of this financial achievement lies in its intelligent control of credit risk and its proprietary AI models, which underpin its flexible, risk-based pricing strategies.

Crucially, this high return did not come at the expense of stability: while the wider market delinquency rate climbed 8.5% during the period, WeLab’s proprietary credit management models allowed its rate to fall by 3.7%.

Backed by this robust risk management framework, the bank has been able to strategically expand its mandate to inclusive lending for previously underserved borrowers.

For the bank, strategic vision extends beyond technology deployment and towards cultivating an AI ecosystem. As CEO Tat Lee, who recently secured the Best Data & AI CEO award at the DALA Awards 2025, shared,

“Adopting AI isn’t as simple as plugging in some fancy tech and calling it a day. The real game changer? Building an AI ecosystem that brings together strategy, culture, technology and partnerships.”

To cement this commitment, the bank has entered an AI partnership with Google to provide comprehensive AI engineering and leadership support to its employees.

This initiative aims to build and hone Google Cloud technical skills, ensuring a future-ready workforce, in line with the bank’s ambitious goal to provide AI-driven financial solutions to 500 million users by 2032.

ZA Bank’s Scale-and-Wealth Model

ZA Bank arrived at profitability through a different, scale-driven path, achieving its first-ever interim net profit of HK$49 million in the first half of 2025.

This financial milestone was built on market penetration, with the bank reportedly becoming the first Hong Kong digital bank to surpass one million users. This scale seems to have translated into robust financial performance, as total net revenue surged by 82.1%, alongside 56% growth in fee income.

Wealth management is said to be a robust contributor, with the bank’s assets under management from investment users rising by more than 125% YoY.

ZA Bank stands out in Hong Kong for its early and consistent push into Web 3.0. The bank has introduced tokenised solutions like Click to Pay with Visa, kicked off crypto trading for retail users, and was the first among virtual banks to offer stablecoin reserve services.

ZA Bank also views its commitment to open banking and user-focused integration as critical infrastructure for the future. In a recent panel discussion during Hong Kong Fintech Week, ZA Bank’s CEO, Calvin Ng, shared that innovation is like a railway system.

The tracks symbolise advanced technologies, but without stations like banks and institutions, the journey cannot go anywhere. It also takes a mix of trains and passengers to keep the ecosystem moving. Progress, therefore, comes from going beyond laying the infrastructure and making the entire network accessible, inclusive and connected.

Ng explained how ZA Bank is using Interbank Account Data Sharing (IADS) to deliver practical, user-focused applications, and stressed the need for industry collaboration to advance open banking. He shared on LinkedIn,

“Innovation isn’t always fireworks. It’s conviction. Small steps, clear vision, and the discipline to keep iterating. Not every “no” stops us; each one gets us closer to “yes”.”

The bank’s future plans centre on extending IADS applications to areas such as one-click eDDA setup for automatic loan repayments, repayment scheduling based on salary cycles, and personalised financial insights powered by real-time data.

What the Remaining Hong Kong Digital Banks Are Betting On

The remaining six Hong Kong digital banks are pursuing varied, tech-driven strategies focused on specialised offerings, ecosystem expansion, and cost efficiency to achieve profitability.

Ant Bank, for starters, is channelling a US$100 million capital injection into strengthening its services and product innovation. The bank’s strategy centres on financial inclusion and leveraging Ant International’s tech for low-interest loans and affordable investments.

Next, Mox Bank plans to broaden its insurance and wealth management services and refine lending products. Mox’s CEO highlighted a central theme of customer empowerment to co-create relevant solutions.

PAOBank is strengthening its position in SME financing and accelerating a push into the insurance market. It launched the Cross-Border E-Commerce Revolving Loan to empower SMEs to scale their business presence.

With a new Insurance Authority license, PAOBank also intends to use partnerships with FWD and China Ping An to leverage fresh leadership and drive technology-led growth.

Meanwhile, livi bank focuses on SME innovation through offerings like the SME Financing Guarantee Scheme, while actively participating in Hong Kong’s GenAI sandbox. The bank intends to strengthen its lending and insurance services while broadening its general fintech offerings.

Fusion Bank is focused on driving significant efficiency through core technology upgrades. The completion of its core banking system migration with Tencent Cloud is expected to deliver a 53% reduction in non-labour IT costs. The bank also gained access to proprietary digital banking technology through a commercial agreement with WeBank Technology Services.

Airstar Bank has prioritised strengthening its technology backbone and reinforcing risk governance for future scale. The bank completed the full migration of its operations to the cloud with Tencent Cloud to lower costs and speed up product iteration.

Strategic Priorities That Will Define Digital Banks’ Next Phase

As digital banks scale, their long-term success will hinge on how well they manage certain priorities. The first could be on their focus on deepening operational efficiency, particularly through responsible and effective use of AI that strengthens risk management and sharpens cost discipline.

The second may involve expanding product depth, as these areas will determine which banks can move beyond entry-level offerings and build meaningful financial relationships with customers.

The final priority could lie in maintaining sustainable profitability amid rising competitive pressure and evolving regulatory expectations. As the market matures, profitability will demand sharper execution and a clearer understanding of where each bank can differentiate.

The next phase will belong to digital banks that can balance speed with discipline, scale with precision, and innovation with responsible stewardship of risk and capital.

Featured image by freepik on Freepik