Leading Digital Banks in Hong Kong – Comparison and Analysis

Dec 10, 2020
6 min. to read

As a jurisdiction, Hong Kong was slow out of the gate when it came to innovation in Fintech. But a committed public-private alliance determined to create Hong Kong as a top Fintech center, a promising move, soon constituted this initial hesitancy.

A government agency set up to raise foreign direct investment, InvestHK, quickly added a Fintech team to accelerate growth in Fintech. According to InvestHK, Hong Kong is home to 48 of the world’s largest financial services firms.

Concerning finance, a new report claims:

Fintech has been actively embraced by the Hong Kong banking industry. Fintech is viewed by incumbent banks as a complementary and supporting technology that promotes progress in productivity and financial inclusion, greatly outnumbering those who see it as a challenge and a substitute for their current firms.

Fintech is seen by most incumbent financial services companies more as an opportunity than a challenge, so the trend goes, at least in Hong Kong. In Hong Kong, traditional banks are said to be adopting Fintech through all forms of financial services and “progressively incorporating Fintech.” Half or more of the conventional banks suggest that either a wide range or a small number of Fintech technologies have been implemented in the fields of savings and deposit account services, payment and conversion of money, personal finance, insurance, and asset management services.

Of course, this pressure to compete and deliver new offerings appears to be positive for clients and firms, and it tends to force incumbents in the right direction by selling virtual bank licenses

Hong Kong declared its plan to take Hong Kong into a “New Age of Smart Banking” in 2017 to advance the banking industry

Hong Kong started accepting proposals for “digital banks” following a screening process and consultation. These are Fintech companies that are natively digital like an incumbent bank without a legacy footprint. In March 2019, with the first endorsements announced, hundreds of aspiring digital banks applied for the first round of virtual bank licenses. It is hoped that further permits will follow

When proposing a new chartering mechanism to encourage creativity and transition from incumbent banking to digital banking, banking is a heavily regulated sector that takes a lot of reflection. To establish a regulatory course for virtual banks, Hong Kong moved with relative alacrity. This can be compared with the United States, which has been debating a Fintech Charter issued by the Office for the Comptroller of the Currency (OCC), the lead bank regulator, for years, which to this day remains elusive. Most digital banks in the United States exploit regulatory arbitrage to provide bank services. Varo Money will be the first automated bank to go through the whole process of acquiring a charter. The odyssey of bank approval has taken several years to complete and is still not fully complete.

In Hong Kong, the app of a virtual bank will execute all the conventional banking activities minus a trip to a branch of a local bank. Without setting low account balance shifts, these digital banks must specifically participate in a retail market that can help encourage the acceptance of virtual banks. And while there is no need for branches, these virtual banks must have a Hong Kong headquarters as a place to treat inquiries.

So, who are these virtual banks that set up Hong Kong operations with hopes of expanding through Asia? Below, along with a brief overview, is the list of authorized virtual banks (according to the Hong Kong Monetary Authority or HKMA):

Ant Bank Limited:

Ant Bank Limited (Hong Kong) is an offshoot of Ant Banking, which is associated with the multifaceted multinational tech company Alibaba, one of the world’s biggest Fintechs. There is also an operation at Ant Bank in Macau. Ant Bank (or Ant Financial) has also been confirmed to be seeking a digital bank license in Singapore, another jurisdiction that has approved an initial batch of digital bank licenses

Airstar Bank Limited:

Airstar Bank revealed a pilot conducted under the supervision of the Fintech Supervisory Sandbox of the Hong Kong Monetary Authority last March. Airstar is a joint partnership between the fourth-largest smartphone brand in the world, Xiaomi Corporation (1810.HK), and AMTD Group (NYSE: HKIB), a major financial services organization that recently listed its shares on the Singapore Exchange, another Asian Fintech center. “We stick to the philosophy of inclusive finance and aim to encourage everybody to experience the fun of financial technologies to become the bank of everyone,” so that any customer can access creative virtual banking services more easily.” In June, Airstar was the second virtual bank to begin providing customer services.

Fusion Bank Limited:

Fusion Bank is a joint venture between Tencent Holdings Limited, China Limited’s Industrial and Commercial Bank, Hong Kong Exchanges and Clearing Limited, Hillhouse Capital, and Adrian Cheng (via Perfect Ridge Limited), a Hong Kong entrepreneur. Jim Lai, VP of Tencent, and the chairman of Fusion Bank, originally called “Infinium,” said that renaming the organization allowed them to help deliver the Fusion Bank brand idea. Fusion Bank expects to provide knowledgeable, smart, healthy, and secure financial services to the general public.”

Livi Bank Limited:

BOC Hong Kong, Jingdon Digits Technology, and Jardine Matheson Group are among Livi’s shareholders. The mission of Livi is to “offer a satisfying and enjoyable digital banking experience that meets your daily needs,” showcasing an easy and safe people-first approach.

Mox Bank Limited:

Mox Bank is a joint effort in association with HKT, PCCW, and Trip.com by managing shareholder Standard Chartered. Mox promises that it is “made by and for those who strive to live life to the fullest,” naming “Generation Mox” to their customers. The virtual bank promises to deliver the first all of Asia in one numberless bank card. On an invitation basis for chosen external clients, Mox started receiving customers in April. The first 3,000 registrants who successfully opened a Mox account were selected to obtain a limited-edition metal Mox Card as “Founding Members.” Over 20,000 have pre-registered.

Ping An OneConnect Bank Limited:

PingAn OneConnect Bank (or PAOB) is an offshoot of another mega-Fintech, the eponymous Ping An Insurance agency. Last week, within five business days, Ping An One Link pledged to sanction loans worth up to HK $2 million (about USD 258,050). If this argument failed, the virtual bank said that it would pay HK $1,000 to the creditor as cash compensation. Picked consumers can achieve savings of 8 percent.

WeLab Bank Limited:

WeLab Bank is an offshoot of WeLab Limited, an online lender and financial services company established in 2013 that is said to operate in Asia with 300 financial institution partners in Hong Kong, mainland China, and Indonesia. WeLab claims about 42 million person consumers and 300 company clients as of 2020. About $6 billion in loans have been created by the firm. WeLab Bank says that it is possible to open an account in under 3 minutes.

ZA Bank Limited:

The first virtual bank to open up in Hong Kong was ZA Bank, part of Zhong An. Similar to WeLab Bank, ZA Bank advises prospective customers that it is possible to open an account in minutes. “The CEO of ZA Bank, Rockson Hsu, said when the bank opened its digital doors: “As the first virtual bank in Hong Kong, ZA Bank is committed to its ‘Community-Driven’ approach to making banking available through technology to all. ‘ZA’ is a reversal of the alphabetical order that reminds one to constantly think out of the box and see things from a different angle, going from Z to A. It’s a positive thing to be audacious, contrarian, and imaginative. ‘Z’ and A’ both mean ‘end-to-end’, symbolizing our contribution to innovation from the front-end (mobile app), mid-office (customer support/operation department) to the back-end (operating system), and from product creation to service processes.

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