For the past few decades, Hong Kong has become the pioneer as far as financial innovation is concerned, and the Asian financial hub has taken another step with the issuance of online-only banking licenses. Joint ventures headed by BOC Hong Kong and British banking giant Standard Chartered have been issued those licenses by the regulatory authority in Hong Kong.
In addition to that, ZhongAn Technologies International Group backed ZhongAn Online P&C Insurance has also been issued a license to operate a virtual banking service by the Hong Kong Monetary Authority (HKMA). The retail banking industry in Hong Kong has grown by leaps and bounds over the past decades, and the latest initiative from the regulatory authorities opens up a lucrative new frontier for financial institutions operating there.
The reason behind online-only banking licenses can glean from the fact that the residents of Hong Kong might not be as happy when it comes to visiting brick and mortar bank branches. According to a survey conducted by Accenture, only 43% of the people living in China administered territory are happy with the experience of going to a bank branch. However, the global average for the same metric stands at 57%, and that is where the big opportunity lies for online-only banks.
The President of ZhongAn International Wayne Xu said,
The biggest goal for this year is a super smooth user experience for core banking services, making sure that it is highly secure, and that our users know that. That’s easy to say, but not easy to do.
In this regard, it needs to be pointed out that the services offered by these online-only banks are probably going to be only popular for customers who are of a certain age and are comfortable with a bank which is completely digital in nature. It is highly unlikely that these banks are going to get a big chunk of the business from older customers.
The services offered by these banks will primarily include deposits, money transfer, and loans. However, it is a safe assumption that if the whole thing turns out to be a success, then more services are going to be rolled out in the years to come. More importantly, if it is a success, then more financial companies are going to enter the segment, and with more competition, the efficiency of the segment will also improve dramatically.