Hong Kong has issued online-only banking licences to three groups, including joint ventures (JVs) of Standard Chartered and BOC Hong Kong, in what could be the biggest shake up in years in the city’s retail banking sector dominated by old-guard lenders.
Besides StanChart and BOC Hong Kong joint ventures, the Hong Kong Monetary Authority (HKMA) has also issued the so-called virtual banking licence to a venture led by online insurer ZhongAn Online P&C Insurance.
The new licence will give its holders access to a lucrative retail banking market in the Asian financial hub, one where many consumers are unhappy with the current options.
According to research from Accenture, 43 percent of people living in Hong Kong have a positive experience when visiting their bank branch versus a global average of 57 percent.
“It is a major milestone in reinforcing Hong Kong’s position as a premier international financial centre,” Norman Chan, chief executive of the HKMA, Hong Kong’s de-facto central bank and banking regulator, said in a statement on Wednesday.
“I believe that virtual banks will not only help drive FinTech and innovation, but also bring about brand new customer experiences and further promote financial inclusion in Hong Kong,” he said.
However, the entrenched position in Hong Kong of established banks, such as HSBC, StanChart and a slew of Chinese banks, is expected to be a major challenge for the holders of the online-only banking licence, whose road to profitability could be long.
StanChart will own 65.1 percent in SC Digital Solutions Ltd JV, while the rest will be owned by Ctrip Financial as well as Hong Kong-based telecoms groups PCCW Ltd and HKT Trust and HKT Ltd, the HKMA said.
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BOC Hong Kong, a unit of Bank of China, will own 44 percent in the Livi VB Ltd JV, while JD Digits will hold 36 percent and Jardines will have 20 percent stake, it said.
ZhongAn will have 51 percent ownership in the ZhongAn Virtual Finance joint venture, and the remaining will be owned by Sinolink Group.
StanChart, which makes bulk of its revenue in Asia, said in a statement the new online-only banking entity in Hong Kong would enable customers to open accounts and apply for financial services “on-the-go” in real time.
Under a new growth strategy, the Asia, Africa and Middle East-focused bank has chalked out plans to invest more in digital technology to accelerate its retail banking growth in key markets.
StanChart CEO Bill Winters said on Tuesday that the London-headquartered bank aimed to launch its Hong Kong virtual bank later this year, as part of its digital initiatives in other markets including Africa and India.