Mobile payment and online financial transactions have become quite common these days.
As retail banks are grappling with high labor and rental costs, virtual banks should have a bigger role to play.
The Hong Kong Monetary Authority(HKMA) has received around 30 applications for virtual banking license. Applicants have to fulfill requirements enumerated in the Banking Ordinance.
It has been reported that the de facto central bank has already rejected around a third of the applications due to inadequate information.
I believe the HKMA is rejecting those who fail to offer a clear picture of their business plan or had no solid financial status.
My guess is that companies that have already obtained Stored Value Facilities (SVF) licenses are more likely to succeed, given that they have access to funds through their operations.
Cases of fraud involving several SVF licensees and customers who signed up for the Faster Payment System (FPS) have been reported. Cases like these have sent an alarm to the market and regulators.
In order to run a virtual banking business successfully, operators have to do their know-your-customer procedures thoroughly. Double customer verification is a must.
Customers should be immediately notified if their bank accounts are stolen.
If they operate properly, virtual banks should have plenty of room for growth in Hong Kong.
This article appeared in the Hong Kong Economic Journal on Nov 21
Translation by Julie Zhu
[Chinese version 中文版]
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