What is a virtual bank? Comparison of services, promotional offers and key selling points of Hong Kong VBs

What is a virtual bank? Comparison of services, promotional offers and key selling points of Hong Kong VBs

Personal Loan

September 28 • 5 min read

In 2019, The Hong Kong Monetary Authority (“HKMA”) issued 8 virtual banking licenses. So far, 7 of the 8 license holders have launched their services in Hong Kong, marking a new era of digital banking.

As suggested by their name, virtual banks are neobanks that do not have physical retail presence. Their services are 100% digital and the services can range from deposit, personal loan, debit/credit card or even insurance. The virtual banks can be accessed primarily through their websites and mobile applications.

Comparison of the 7 virtual banks that have been launched

As of now, virtual banks offer fewer products when compared to traditional banks. Each of the virtual banks is focusing on a different value proposition for example Mox Bank launched a numberless bank card that comes with various spending rebates, livi Bank launched a virtual credit card that supports UnionPay QR code.

On the lending sector Airstar Bank is providing a technology backed, fast approval loan with very attractive interest rate. In the meantime, Welab Bank’s parent company is a well-known lending platform so it is expected that Welab Bank will also join the competition with an attractive lending product.

ZA Bank was the first virtual bank to launch in Hong Kong, among other products, ZA is introducing low cost virtual insurance under the ZA Insure brand.

Ant Bank currently only provides deposit and transfer services, but it’s expected that AlipayHK users can open Ant Bank accounts and use its services in the e-wallets in the future. As for PAO Bank, it became the first bank to provide loan and deposit services for SMEs.

Virtual bankDepositPersonal  loanDebit cardPayment/ TransferInsuranceSME services
Airstar Bank
👉Limited time offer
livi Bank
Mox Bank
Welab Bank
ZA Bank
👉Limited time offer
Ant Bank
PAO Bank

Comparison of VBs’ promotional offers

On top of existing traditional banks, Hong Kong is seeing an influx of new virtual banks launching in 2020. Hong Kong virtual banks are giving out attractive offers to attract customers and come out on top of competition. 

Virtual bankPromotional offers
Airstar Bank– 3.6% annual interest rate for the first HK$20,000 deposit for 1 year
– Apply for a personal loan through Planto to enjoy APR as low as 1.85% and receive HK$200 cash reward upon a successful application
livi Bank– Receive HK$100 cash reward after opening an account
– Earn HK$100 for each successful referral of up to HK$1,000 0.5% interest rate on the first HK$500,000 deposit
– Shake your phone after using UnionPay QR code to receive reward up to 3 times per day
Mox Bank– 1% interest p.a. daily interest on the first HK$1 million deposit
– 1% unlimited cashback on eligible spending 5% cashback at Mox’s Founding Merchants (up to HK$1,000 of cash back) before 31 December 2020
WeLab Bank– 8% cash rebate on WeLab Debit Card until 27 January 2021
ZA Bank– Receive a 200 HKD cash reward or 3% rate-up coupon by using Planto’s link and exclusive promo code to open an account 👉Learn More
– 1% interest on the first HK$500,000 deposit
Ant Bank – 2.5% interest p.a. on the first HK$20,000 deposit
– 1% interest p.a. on deposit above HK$20,000 and below HK$500,000
PAO Bank– 2.5% interest p.a. on the first HK$1 million deposit
The offers are subject to banks’ terms and conditions which may be changing from time to time. Please visit banks’ websites for latest offers.

Who are the 8 virtual banking license holders?

Virtual bankShareholders
Airstar BankXiaomi Corporation, AMTD Group
livi BankBank of China, Jardine Matheson Group, Jingdong Digits Technology
Mox BankStandard Chartered, HKT, PCCW, Ctrip
WeLab BankWeLab
ZA BankZhong An Insurance
Fusion BankTencent, ICBC, Hillhouse Capital
Ping An OneConnect BankPing An Insurance
Ant BankAnt Financial

Virtual banks vs. traditional banks: Pros & Cons

Digital banking service has moved banking online and does not require any physical branches, this helps to reduce rent and manpower costs. The service can also be accessed anywhere and almost anytime making it very suitable for new generation of consumers.

Virtual bank advantages:

  1. 24-hour mobile banking: banking service can be accessed anytime and from anywhere without queuing. New customers can swiftly open their accounts by scanning HKID or upload selfie photo
  2. Lower fees: virtual banks generally do not impose minimum balance requirement, and they also charge less or no fees across various product lines for example low account balance fee, handling fee or loan early repayment fee
  3. Increase market competition: market competition is often good for the consumer. In order to attract/retain customers, both virtual and traditional banks are expected reduce fees and provide attractive offers such as increasing deposit interest and credit card cash rebate
  4. Promote digital banking: virtual banks are expected to set the pace of innovation in financial services across areas like mobile banking, virtual credit card, cross-border payment and virtual insurance
  5. Connection with traditional banks: virtual banking accounts can send or receive money from traditional banks seamlessly through FPS and real-time transfer which make the 2 ecosystems complementary to each other

While virtual banks have their own strength, they are most likely not going to replace traditional banks entirely as virtual banks also have some shortfalls which include:

  1. No physical branch: while all virtual banks offer great mobile banking experience, many consumers still prefer to bank offline (for example money withdrawal at a branch) or speak face to face with a banking professional. Furthermore, older generation of consumers would need to learn about new technology in order to enjoy virtual banking service
  2. Fewer service offering: traditional banks still have advantage when it comes to the breath and variety of financial products. This is particularly true on some product categories like investment and mortgage which are not being offered by any virtual bank today
  3. Standardized service: in general, virtual banks have designed their services for majority of the consumers. However with traditional banks, consumers who require personalization or high-touch service can engage directly with their account manager for direct communication 

Ultimately, it is expected that traditional banks will transform themselves in order to keep up with innovation brought on by virtual banks. For example both Payme by HSBC and inMotion by CITIC Bank are both digital products developed by long standing traditional banks. Additionally, many existing banks like HSBC, Bank of China, Standard Chartered and Dah Sing have announced that they will stop charging certain fees in order to stay competitive.

The investment landscape has seen rapid adoption of many new digital platforms such as Futu, SoFi HK and Flexinvest by HSBC. Unless virtual banks are coming up with new investment innovation, there may not be a lot of impact on the market.

Still, Hong Kong consumers should be excited about virtual banking as there are many successful virtual banks around the world. One of the most famous case would be Monzo, a U.K. digital bank which was established in 2015. Monzo’s key selling points include automated saving/accounting as well as free withdrawal from Monzo account around the world. By 2020, Monzo has accumulated approximately 4.5 million users, most of which are under 40 years old (a great indicator that virtual banking service is extremely suitable to young consumers).

What consumer protection is in place for virtual banking service in Hong Kong?

Like all banks, virtual banks in Hong Kong are supervised by the HKMA, and they are also participants of the Deposit Protection Scheme. This means up to HK$500,000 of deposit is protected per customer.

Additionally, although virtual banks’ services are online, the banks are still established and have physical office in Hong Kong. Customers can still get in touch with virtual banks physically for matters which cannot be resolved online.

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