Hong Kong handed out three virtual banking licences allowing financial institutions to operate branchless savings and loans businesses on Wednesday, as the city catches up with other Asian jurisdictions in disrupting traditional banking.
Livi VB, co-owned by Bank of China (Hong Kong), JD Digits and Jardines, SC Digital Solutions, a joint venture between Standard Chartered, HKT, PCCW and Ctrip, and Zhong An Virtual Finance, a joint venture between ZhongAn Online and Sinolink will be the operators of the first three licences, according to the Hong Kong Monetary Authority (HKMA).
The city now has 155 licensed banks.
Many non-banking companies will join the sector, bringing new models and experience to the banking sector, said Yuen. As the virtual banks do not need to open branches and can use technology to cut costs, they will be better placed to offer small loans – as small as a few hundred dollars – and still make a profit. Traditional banks, which need millions to maintain their network, tend not to focus on small customers.
Virtual banking is not new in Asia or in Europe. Japan Net Bank opened in 2000, while Seven Bank, a unit of Seven & I Holdings, has been offering financial services through automated teller machines in 7-Eleven convenience stores in Japan since 2001.
Mainland China too has beaten Hong Kong to the goal, with five virtual licences issued since December 2014, attracting several of the country’s largest companies to put their resources and technology behind these internet-based lenders.
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