Assessment of Hong Kong’s Virtual Banks and HKMA’s Regulatory Approach

The Hong Kong Monetary Authority (HKMA) has been closely monitoring the progress of virtual banks in the region, with a focus on cutting down fees and increasing competition in the industry. With the issuance of eight virtual bank licenses in 2019, the sector has seen significant growth and innovation.

The virtual banks, soon to be renamed as digital banks, have attracted a combined 2.2 million customers by the end of last year, marking a 20% increase from the previous year. These digital banks, including ZA Bank, WeLab Bank, Mox Bank, and others, are revolutionizing the banking sector by offering services exclusively online, without any physical branches.

HKMA deputy CEO Arthur Yuen, whose tenure has been extended by two years, emphasized the importance of assessing talent shortage and the impact of AI on staffing in the banking sector. Yuen highlighted the need for banks to prepare for the adoption of AI and provide training to help staff transition to other roles in wealth management or green finance.

Yuen’s regulatory approach focuses on managing risks rather than simply reducing them, allowing banks to expand their business while ensuring appropriate risk management. With concerns about operational risks and rising bank scams, Yuen emphasized the importance of business continuity and data backup measures to mitigate potential threats.

In a unique collaboration, Yuen teamed up with Cantopop star Wan Kwong to produce a music video educating the public about common phishing tactics used by scammers. The video has garnered 5.2 million views on YouTube, showcasing Yuen’s commitment to raising awareness about financial scams.

Despite his successful career in banking regulation, Yuen revealed that he once dreamed of pursuing a career in music but was discouraged by his mother due to his height. Nevertheless, Yuen continues to perform for the elderly during weekends, aiming to entertain and educate retirees about the risks of financial scams.

As the digital banking sector continues to evolve and expand, Yuen’s leadership and innovative approach will play a crucial role in shaping the future of banking in Hong Kong.
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