The Hong Kong Monetary Authority (HKMA) announced that it will not issue any more digital bank licenses following its comprehensive review of virtual banks.
The review, conducted in 2024, assessed the operations and impact of the eight virtual banks that began operating in 2020.
The eight virtual banks currently operating in Hong Kong are Airstar Bank, Ant Bank, Fusion Bank, Livi Bank, Mox Bank, Ping An OneConnect Bank, WeLab Bank, and ZA Bank.
The HKMA examined the delivery of policy objectives, market acceptance, business performance, and user response of these banks.
The findings showed that virtual banks have met their policy goals and gained wide acceptance, with 2.2 million depositors by the end of 2023.
Despite initial challenges, including the COVID-19 pandemic, virtual banks recorded moderate business growth, a seven-fold increase in operating income, and a 15% reduction in net losses from FY2021 to FY2023.
Eddie Yue, Chief Executive of the HKMA, said,
“Looking ahead, with the diversity of VBs [virtual banks] and incumbent banks, the HKMA considers that the current number of virtual banking licenses is optimal and does not see any strong justification to introduce more new VB players to the market at this juncture.”
This stance contrasts with the Bangko Sentral ng Pilipinas (BSP), which recently announced it will resume accepting applications for digital banking licenses after a three-year hiatus, opening the industry to more players as it seeks profitability.
In a related development, the HKMA is seeking public input on a proposal to rename “Virtual Bank” to “Digital Bank.”
This initiative aims to better reflect the current banking model as well as to boost public confidence as the term in Chinese, where ‘virtual’ can suggest ‘fictional’.
Interested parties are invited to submit their views by 5 September 2024.
Depending on the consultation results, the HKMA plans to amend the guideline to effect the proposed change.
The consultation includes two main questions: whether “Virtual Bank” should be renamed, and feedback on the proposed new name “Digital Bank.”
The report and consultation paper are available on the HKMA website.
