Comparing Virtual Banking to Traditional Banking in Hong Kong

The world is energised to step into a new Fintech era. Asia, in particular, has a rapid increase in the number of virtual banks. Compared to traditional banks, virtual banks have some attractive offers to attract customers and come out on top of the competition. Let’s learn more!

What are virtual banks?

Generally speaking, virtual banks refer to banks that are ‘digital-only’. Since they do not have any physical branches, their banking service is mainly offered through electronic channels such as mobile apps and online platforms.

Same as traditional banks, virtual banks must follow a set of supervisory regulations laid down by Hong Kong Monetary Authority (HKMA), with some requirements that are specific to their technical operations.

Nonetheless, virtual banks are secured by Deposit Protection Scheme, meaning all eligible deposits are protected to a maximum of HKD $500,000, which is as legit and reliable as typical banks.

Source: HKMA

Further Reading: 

“NFT: What is it? Why is it shaking up the Art World?”“More than a game: Everything you need to know about Metaverse”“What is Cryptocurrency? All you need to know about Bitcoin and Blockchain Technology”

8 Virtual Banks in Hong Kong

Airstar Bank Limited is a joint venture between Xiaomi and AMTD Group. As the second virtual bank to launch full operations in Hong Kong, it was granted a banking licence by the HKMA in May 2019. Ever since, Airstar Bank is committed to its core mission and value proposition of becoming ‘Everyone’s Bank’.

For customers who successfully open a savings deposit account after 18 August 2021, Airstar Bank offers a 5% interest rate per annum for the first HKD $20,000 deposit amount which lasts for 3 months (95 days) starting from the date of account opening.

Ant Bank is part of Ant Group. In September 2020, Ant Bank was officially launched to offer virtual banking services, making it the 6th virtual bank in Hong Kong. Under the partnership with AlipayHK, Ant Bank allows seamless integration of banking services into consumers’ daily scenarios, such as clothing, food, rent, transportation and entertainment.

Currently, for any deposit amount of HKD $20,000 or below, Ant Bank offers an annual interest rate of up to 2%. If Alipay is chosen as the payment method, clients can even receive up to 10 HKD $100 coupons upon every single net transaction of HKD $100 or above.

Livi Bank is jointly established by BOC Hong Kong, Jingdong Digits Technology Holding Co., Ltd and the Jardine Matheson Group. With an aim to foster fintech innovation, Livi Bank adopts technologies such as artificial intelligence, blockchain, big data and smart risk modelling to create a unique banking experience. 

Livi Bank has recently rolled out a reward programme called ‘Shake Shake Rewards’. Customers can shake their mobile device and earn up to HKD $500 that can be redeemed on the next purchase per calendar month.

Fusion Bank is backed by a number of big names, including Tencent Holdings Limited, Industrial and Commercial Bank of China (Asia) Limited, Hong Kong Exchanges and Clearing Limited, Hillhouse Capital and renowned Hong Kong entrepreneur Mr. Adrian Cheng. In December 2020, Fusion Bank announced the full public launch of its banking services and became the first Hong Kong virtual bank to offer foreign exchange service.

Livi Bank offers a wide range of promotions, for example, the ‘Tesla Exclusive Unsecured Loan’. Starting from now to 30 April 2020, customers who submit a registration application and successfully obtain Tesla Exclusive Loan can enjoy up to HKD $3,300 cash rebate.

Mox Bank is a virtual bank created by Standard Chartered, in partnership with PCCW, HKT and Trip.com. Launching in September 2020, Mox Bank is dedicated to delivering a suite of retail financial services and all-in-one lifestyle benefits to clients. 

To encourage the use of Mox Card, all customers can earn unlimited CashBack on eligible transactions. From time to time, Mox Bank will also offer a chance to earn extra CashBack at certain rates for spending with selected CashBack Merchants.

Ping An OneConnect Bank is shortly called PAOB. Since its official launch in September 2020, PAOB has become the first virtual bank in Hong Kong providing banking services for small and medium-sized enterprises, PAOB has established a business platform providing tailored customer experience and cost-effective virtual banking services for local SMEs. 

Commencing on 1 August 2021, POAB introduced the SME Financing Guarantee Scheme to help SMEs seize every business opportunity. For applicants who successfully draw down the loan within the promotion period, 80% or 90% guarantee fee will be rebated to clients’ savings account on or before a specific date.

Since its launch in July 2020, WeLab Bank has offered a range of digital banking services to millions of individuals in Hong Kong. With the mission to design a personalised full-scope banking experience, WeLab Bank strives to adopt game-changing technology to build customer-centric products with a superior experience.

From now until 28 February 2022, all customers can participate in the lucky draw to win up to 100% spending rebate on eligible transactions that fall into the food and beverage category, capped at HKD $500.

On 24 March 2020, ZA Bank officially launched its services to Hong Kong citizens, making it the very first virtual bank in Hong Kong. There is now a range of banking services available through ZA bank, including loans, insurance, business banking, FPS transfers, time deposits and more.

New customers who join ZA Bank with an invitation code can get HKD $100 cash reward upon account opening and deposit HKD 10,000 within 7 days. ZA Bank also offers 0.55% annual interest rate to eligible deposits.

Pros & Cons of virtual banks

Virtual banks are winning over a considerable number of customers for several good reasons, including but not limited to:

With virtual banks, gone are the days when people had no choice but to wait in a long queue. Customers can access their accounts 24/7 without the need to visit a physical branch, allowing them to manage their personal finance quickly and seamlessly.

Riding the wave of technology trends like biometric, many virtual banks are now exploring several physical attributes that can be employed for fast and secure authentication, examples include fingerprint, voiceprint and facial recognition. Plus, an extra layer of security is usually activated once the system detects a login from a new device for the first time, which can effectively prevent unauthorised and unintended transfer.

Not only do virtual banks offer basic banking features, but they also have some innovative services that traditional banks fail to implement. From tracking daily spending to settling payments, most virtual banks have a whole slew of cutting-edge financial tools that can make these processes a lot simpler. Users can even set up alerts through email, text or push notifications to avoid any late fees and overdrafts.

Thanks to artificial intelligence and big data, apart from assisting users with completing common transactions such as payments and transfers, some virtual banks can also link to other most-used applications like ride-hailing, hotel booking and restaurant reservations, delivering an exceptional customer experience to each and every individual client.

One of the most competitive advantages of virtual banks is their cost-effectiveness. Due to the absence of physical branches, virtual banks do not have the same level of infrastructure and personnel costs as conventional banks. These savings can thus be passed on to customers in the form of higher interest rates, for instance, interest rates at virtual banks can be 1,000 times higher than a traditional one.

Still, there are some whistleblowing concerns associated with the whole fintech revolution:

When dealing with complicated financial problems and difficulties, people might prefer in-person help. However, since virtual banks have no physical locations, it is becoming harder for customers to seek assistance face-to-face. To improve customer satisfaction, not only do some virtual banks provide 24/7 phone-based customer service, but they also deliver top-quality support via social media and online chat.

Since virtual banks are going ‘cashless’, it might be inconvenient for people who need to deposit money frequently. Fortunately, many virtual banks are part of the shared branching network, meaning clients can enjoy free access to tens of thousands more ATMs around the globe.

It should be noted that a system’s stability and efficiency are not always guaranteed. Once the servers go down, users might be unable to gain online or mobile access to their banking accounts. This might be a problem but not impossible to avoid. Backed by advanced technologies, virtual banks are dedicated to maintaining a consistently smooth customer experience through regular server maintenance.

Source: May Planning, Nerdwallet, Business Insider, IFEC

Virtual Banks VS Traditional Banks

| | Virtual Banks | Traditional Banks | | Fee | Lower fees or even free | Higher fees | | Interest Rate | Higher | Lower | | Scope of services | Focus on retail banking | Full range of banking services | | Target Customers | Mainly SME | All types of clients | | Service Channels | Online and supplemented with phone customer support | In-person, online and phone support | | Minimum Account Balance Requirements | None | Vary from banks to banks |

Source: IFEC

FAQ

Yes, all virtual banks are subject to the same set of supervisory requirements applicable to conventional banks.

Of course. Since security and reliability are the cornerstones of a formal financial system, a responsible virtual bank must adopt a top-of-the-line security approach. Most importantly, all virtual banks are insured by the Deposit Protection Scheme, therefore, even though they shut down unexpectedly, account holders can receive compensation up to a limit of HK$500,000.

The cash withdrawal procedure varies from bank to bank. Some allow users to make cash deposits or withdrawals via particular ATM networks, while some require clients to transfer funds to other bank accounts given that direct cash withdrawal service is not available.

Source: Consumer Council, HKMA, HKDPB

Further Reading: 

“NFT: What is it? Why is it shaking up the Art World?”“More than a game: Everything you need to know about Metaverse”“What is Cryptocurrency? All you need to know about Bitcoin and Blockchain Technology”