Virtual Banking

Hong Kong’s Virtual Banks May Have to Look Beyond its Borders in Their Battle for Talent

Virtual banks have finally made an inroad into Hong Kong’s financial industry. The Hong Kong Monetary Authority (HKMA) has begun granting licences for virtual banks to operate in the special administrative area in March this year.

To date, the HKMA have given the green light to four operators, with another four in the pipeline. For many, this move seems a little late and Hong Kong will be looking to play catch up with other Asian countries like Japan, South Korea and even it’s mainland counterpart.

To contextualise things, Japan’s first virtual bank Japan Net Bank started operations as early as October 2000, while China has been dishing out licences since 2014. In Southeast Asia, Vietnam has seen Timo, its first branchless bank go live in 2016.

Having said that, virtual banks in Hong Kong could be facing a bigger problem than just catching up to its peers. With HKMA looking to approve more licences, virtual banks operating in Hong Kong might find it a challenge to fill the job roles with relevant talent.

Already, the virtual banks that have received licences from the HKMA have respectively announced hiring plans. WeLab announced plans to double its headcount to 200 in the next 12 months; Standard Chartered’s SC Digital Solutions Ltd is looking to boost numbers from 100 to an additional 40; ZhongAn Virtual Finance also has plans to add more manpower to its 100-strong team split across Hong Kong and China.

Growing demand

Across Asia, the adoption of virtual banks in the region have been a lot faster as compared to its Western peers. This is because of a relatively higher percentage of unbanked population across the region; virtual banks provide the unbanked and underbanked population a way to manage finances, all accessible with just an internet connection.

For any operators in the Asia region, the accessibility to financial services provided by virtual banks has driven up demand. In fact, according to a McKinsey report, as many as 80 percent of customers in Asia would consider moving nearly half of their assets to a fully digital account.

With an exponentially growing demand, virtual banks would have to scale up and scale out quickly to keep up and meet expectations, or risk being left in the dust. To add insult to injury, the HKMA has given the virtual bank operators a nine month period for them to be fully operational.

For comparison, South Korean authorities initially gave approval for setting up two virtual banks in 2015, but both banks, K Bank and Kakaobank were not fully operational until 2017.

Short on talent, short on time

This puts immense pressure on Hong Kong’s newly minted digital based financial industry. In a recent report by Hays, the financial sector is still facing shortage of talents, especially in technical roles. Piling on to the list of concerns is the new regulatory changes that comes with a new sector of finance.

What this translates to, is the demand for talents with a totally different set of skills and knowledge. This isn’t a problem that can be solved with just existing talents in the financial sector; it requires fresh blood in a very specialised area that is also rapidly changing; specifically, talents specialising in system development, as well as risk and compliance.

To cope with demand, HKMA have announced plan to establish Academy of Finance (AoF) back in 2018. It is an initiative that brings together the Government, the regulators, the financial sector, tertiary institutions and professional training bodies to promote financial leadership development. It will also act as a repository of knowledge and centre for monetary and financial research.

Through AoF, it is hoped that existing talents in the financial industry will get an upgrade, allowing them to be better prepared for facing the new requirements that come with the digital native job roles. However, with the launch date slated for the middle of 2019, any training or cooperative efforts might not be done in time for the nine-month deadline set by HKMA.

Cross border opportunities

The answer to Hong Kong’s talent woes may very well lie beyond its borders.

With the Greater Bay Area initiative underway, much of the businesses in Hong Kong are focusing on developing and expanding their operations across Macau and the nine cities in Guangdong province.

Talents in fintech is no different. Considering the headstart that its neighbour has in digital native banking operations, Hong Kong would do well to leverage on the available expertise in the region. In fact, Standard Chartered is already looking to ramp up hiring in Hong Kong in efforts to capture the Greater Bay Area business.

Additionally, just as Hong Kong has an abundance in financial talents, Shenzhen (part of the Greater Bay Area initiative) being a tech hub also has a surplus of tech talents. If both cities play their cards right, they can strike a mutually beneficial partnership that will enable talents with a pure play tech or finance background to collaborate effectively.

As it stands, Hong Kong may not have the necessary talents to cope with the increasing demand for digital only banks. However, there are plenty efforts in the pipeline to ensure that the future is secure to move forward in a digital world. Until then, Hong Kong will have to rely on the good old fashion outsourcing talents from overseas, and have talents from everywhere else in the globe holding down the fort.