In order to promote "smart banking", the Hong Kong Monetary Authority has successively issued 8 virtual banking licenses.
The business has been developed for nearly three years. Some members of the Legislative Council believe that the emergence of virtual banks has successfully improved the banking industry’s e-banking services, and consumers have also experienced different innovative services. It's time to review and loosen regulatory restrictions so that the "gap" between virtual banks and traditional banks can be narrowed so that they can compete fairly and compare the services, efficiency and operating costs between them.
Some scholars also believe that when the government promoted the development of virtual banks, it did not cooperate with other policies to dismantle walls and loosen ties, which hindered the development of virtual banks. It is suggested that the Financial Secretary should lead the study on how to integrate the current financial services in Hong Kong through infrastructure such as virtual banks. , to promote the overall financial technology development.
In recent years, various countries have proposed "Open Banking" (Open Banking), hoping to bring a data revolution to financial institutions.
Through the open API, the product and user data previously closed by banks are shared with third-party service providers, improving user experience, promoting competition, and is expected to bring more diversified services and benefits.
Among them, the UK is the most aggressive, passing legislation to force the top nine domestic banks (CMA9) to open their APIs.
As for Hong Kong, it was once criticized by all circles for developing too slowly and wanting to "catch up behind". Issued 8 virtual banking licenses, and proposed "Fintech 2025" in 2021, aiming to encourage the financial industry to fully apply financial technology by 2025.
Chan Chun-ying, a member of the financial sector of the Legislative Council, pointed out that the emergence of virtual banks has played a role in promoting the banking industry.
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The launch of Virtual Bank accelerates the pace of bank digitization
The emergence of virtual banks has really accelerated the pace of bank digitization.
In an interview with "Hong Kong 01", Chen Zhenying, a member of the financial sector of the Legislative Council, said that virtual banks have played a role in promoting the banking industry.
For example, he said that virtual banks use face recognition and other technologies to process account opening, which makes traditional banks also study how to simplify the account opening process; virtual banks use big data to proactively provide customers with credit lines, which also makes traditional banks launch similar products.
Virtual banks also provide users with small loans ranging from thousands to ten thousand yuan. When traditional banks grant loans, they have to go through a systematic approval process. Due to the high cost, they often do not approve small loans. On the contrary, virtual banks use financial Technology simplifies procedures so that the public can benefit from inclusive finance.
Indeed, KPMG China published a report in the middle of last year, stating that traditional banks have improved e-banking services in response to the challenges of virtual banks, thereby reducing fees.
Ruan Guoheng, vice president of the HKMA, also wrote an article, pointing out that in addition to general welcome offers and bank card consumption rebates, the instant experience of opening a virtual bank account, bank card without a number, virtual debit card, and joint e-wallet use of banking services have made the public appreciate Banking services can also make a difference.
Li Zhaobo bluntly said that the government has "moved too fast" in the development of financial technology. At this stage, the policy should be re-examined, and the walls should be further removed to avoid the loss of "people and wealth".
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Li Zhaobo: There is a mismatch in the development of financial technology
Competition brings service innovation, but the overall market does not seem to expand accordingly. The eight virtual banks have not yet turned losses, which is in contrast to the bustle and grandeur when they opened.
In an interview with Hong Kong 01, Li Zhaobo, an honorary teaching and research scholar of the Asia-Pacific Institute of Business and Economics, CUHK Business School, said bluntly that the government has "moved too fast" in the development of financial technology. Both "people and wealth" are lost.
Li Zhaobo explained that there is a mismatch in the development of "financial technology" in Hong Kong, which means that "technology" in financial technology is only a channel, and more importantly, it is a service. When the industry introduced more competition, the policies failed to keep up. On the contrary, other financial fields, such as insurance and MPF, have not seen much progress in financial technology. "Some markets (insurance, MPF) have a lot of money , but the technology is slow; some markets (banks) have technology, but because of the slow development of regulation, there is competition and there is no policy cooperation, so why not die?"
From the rough portrait, the basic face of "Hong Kong Drifters" can be outlined: young, highly educated, highly mobile, mainly engaged in the "Golden Land Protection" industry.
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Taking deposits as an example, due to problems such as eDDA, open API, and payment system, it is difficult for virtual banks to attract new funds from traditional banks. Although the 8 virtual banks have tried their best to attract customers in the past, the total deposits at the end of last year Only about 25.28 billion yuan, a slight drop from 25.31 billion at the end of 2021.
Li Zhaobo said bluntly that it is not easy for Xuyin to expand its customer base. Although there are no costs such as shop rent, if it attracts customers with high interest rates for a long time, the operating costs will also increase, and most of the customers are young people. "What about the elderly?" Can’t use (virtual money), but what about young people? They don’t have much relative assets, and those with high assets don’t know how to use them. (Young customers) must have a long-term relationship if they want to take care of themselves.”
Furthermore, he believes that the development of financial technology in Hong Kong is "fragmented" and the market competes with each other. There is a securities firm for investment, and there is no MPF, so think about it, what do virtual banks do?"
In order to promote "smart banking", the Hong Kong Monetary Authority has successively issued 8 virtual banking licenses.
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Chen Zhenying: High cost of capital restricts the development of virtual banking business
Chen Zhenying also has a similar view.
He pointed out that when the HKMA launched the virtual bank, it was initially positioned to supplement the shortcomings of traditional banks. However, at present, the virtual bank mainly relies on providing high interest rates to attract customer deposits, which makes the cost of funds high and limits business options. It is difficult for banks to compete with traditional banks in businesses such as syndicated loans, and they can only rely on unsecured loans with higher risks and higher returns.
He pointed out that due to the short operating period of virtual banks, the HKMA has stricter regulations. However, after the epidemic and changes in the economic environment, he believes that it is time for the HKMA to review and relax regulatory restrictions so that the relationship between virtual banks and traditional banks The "gap" is narrowed. If virtual banks are allowed to operate cross-border business, the two can compete fairly and compare services, efficiency and operating costs between them.
Li Zhaobo believes that at least under the leadership of the Financial Secretary, the restrictions on services such as virtual banking, insurance, and MPF should be gradually dismantled and loosened.
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We should gradually tear down the walls and loosen the ties under the leadership of "Cai Ye"
Li Zhaobo believes that at least under the leadership of the Financial Secretary, the restrictions on services such as virtual banking, insurance and MPF should be gradually dismantled and loosened, and different services should be integrated through technology through the characteristics of virtual banks. There is little hope for the development of fintech.”
Chen Zhenying emphasized that although virtual banks are only part of the development of financial technology, they are also an important part. He does not want to see virtual banks withdraw from the market due to operational problems. "The market needs virtual banks, and there must be competition... It is too early to determine the success or failure of Yijia, and its strength has not yet been fully demonstrated. It is necessary to make virtual banks operate and supplement the functions that traditional banks lack.”
Monetary Authority: The development is not lagging behind the expected daily communication review
As for how the authorities can support the development of virtual banks, Hong Kong Monetary Authority Vice President Ruan Guoheng mentioned at the banking industry work review press conference that he has daily communication with a group of virtual bank operators to review whether regulatory measures have hindered the normal development of virtual banks.
At present, the development of virtual banks is not behind expectations. With reference to the development forecasts of the plans submitted by some virtual banks, the current progress is not far behind, and individual developments are in line with expectations.
In response to some virtual banks reporting that eDDA has been restricted in recent years, Ruan Guoheng quoted the Banking Association and encouraged members to cooperate as much as possible. Through eDDA, "funds can enter and exit" is not a one-way flow, but a two-way flow.
Ruan Guoheng also pointed out that there are many ways for customers to transfer funds, and it is not necessary to use eDDA, and methods such as FPS can also be considered.
Consider sharing the API with client authorization
In addition, regarding virtual banks reflecting that traditional banks are unwilling to "open API", Assistant President (Bank Supervisor) Chen Jinghong said that the HKMA launched the Open API framework in 2018, which will strengthen cooperation between banks and third-party service providers. During the period, four phases of Open API have been implemented, and the number of third-party service providers registered to use these APIs has been growing steadily. As of December 2022, more than 1,300 registrations have been recorded, and there are more than 600,000 banking product applications and payments per month Transactions are completed via an open API.
Chen Jinghong added that in the future, the API will be shared with the Association of Banks and 28 retail banks participating in the sharing of APIs, and the APIs will be shared with the authorization of customers. He emphasized that the new idea is still in the preliminary stage.
In response, ZA Bank pointed out that Virtual Bank is an indispensable member of Hong Kong’s financial technology development, and hopes to continue to receive support from the government and all walks of life, and use its existing technological advantages to help Hong Kong’s financial industry make another success on the international stage.
