About half of Hong Kong SMEs have heard of “virtual banks” – survey shows

Maria Nikolova

“Standard Chartered Hong Kong SME Leading Business Index” shows 23% of SMEs surveyed are reluctant to adopt virtual banking service.

The concept of “virtual banks” is gradually gaining popularity in Hong Kong, the results of the latest “Standard Chartered Hong Kong SME Leading Business Index” survey indicate. Conducted during the second half of June 2018, the survey covered 811 local SMEs.

The study shows that whereas 46% of surveyed SMEs have heard about “Virtual Bank”, 23% are reluctant to adopt virtual banking service. For those interested in using the service, “Cybersecurity” (77%) and “System stability” (61%) are the key factors in service selection.

Mr Gordon Lo, Director (Business Management) of the Hong Kong Productivity Council, commented,

“In the digital era, enhancing productivity with technologies is an irresistible trend for all industries. The Hong Kong Monetary Authority has taken the lead in encouraging the introduction of virtual banking in Hong Kong. Doing away with physical branches, virtual banks draw on innovative technologies such as artificial intelligence to offer a new fast and convenient experience for their customers”.

“However, there are concerns about the security of online transaction. With the emergence of FinTech, the associated cybersecurity risks cannot be overlooked. The Hong Kong Computer Emergency Response Team Coordination Centre of HKPC will closely monitor the development of virtual banks and offer timely security advice to service operators and users”, he added.

Let’s recall that, in the end of May this year, the Hong Kong Monetary Authority (HKMA) published its guidelines on the authorization of virtual banks. During the public consultation on the matter, there was broad support for virtual banks to operate in the form of a locally-incorporated entity with no physical branches.

The HKMA has pointed out that a key objective of introducing virtual banks in Hong Kong is to help promote financial inclusion by leveraging on the banks’ IT platforms that would lower the incremental cost of taking in additional customers. The HKMA therefore remains of the view that virtual banks should not impose any minimum balance requirements or low-balance fees on customers.

Several banks, including Standard Chartered Bank (Hong Kong) Limited have indicated their interest in virtual banking. In June, Standard Chartered said it was planning to apply for a virtual banking license in Hong Kong. The move is a part of the bank’s strategy of advancing financial inclusion, fintech innovation and bringing enhanced client experience in Hong Kong.

The bank says it has formed a task force to study the details of the revised guidelines on the authorization of virtual banks as set out by the HKMA.

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