Hong Kong Plugs Virtual Banks, Issuing First Licenses

Hong Kong’s monetary authority issued the first batch of virtual bank licenses to three companies backed by mainland tech giants and financial institutions as the city moves to tap into smart banking and fintech expansion.

The Hong Kong Monetary Authority, the special administrative region’s de facto central bank, said Wednesday the licenses would take effect March 27, and services will be officially launched within the next six to nine months.

The issuance of virtual bank licenses is a key step for Hong Kong to move toward a new era of smart banking and enhance the city’s position as an international financial hub, said HKMA CEO Norman Chan Tak-lam.

Winners of the first licenses are Livi VB Ltd., SC Digital Solutions Ltd. and Zhongan Virtual Finance Ltd.

Livi is a joint venture formed by Bank of China (Hong Kong) Ltd., Beijing Jingdong Financial Technology Holding Co. — the financial technology arm of e-commerce giant JD.com — and British conglomerate Jardine Matheson Holdings Ltd. With an initial investment of HK$2.5 billion ($320 million), Livi is expected to start online banking services in the next six months.

SC Digital is funded by Standard Chartered Bank, PCCW Ltd., Hong Kong Telecommunications Ltd. and Ctrip Finance, the fintech unit of Ctrip.com International Ltd. Standard Chartered said the virtual bank will be integrated with other services of PCCW, HKT and Ctrip, providing a wide range of retail financial services and products.

Zhongan Virtual Finance was set up by Sinolink Group and ZhongAn Online P&C Insurance Co. Ltd., which is backed by Alibaba Group Holding Ltd.’s founder Jack Ma and Tencent Holdings Ltd.’s Pony Ma. The company said it is set to roll out its first batch of financial products by the end of the year.

Hong Kong disclosed its online banking push a year ago. The HKMA received 33 applications and shortlisted eight applications. The remaining five applications are still under review.

Under HKMA guidelines for virtual banks issued last year, a newly established virtual bank needs to have at least HK$300 million ($38.2 million) in capital and to set up at least one physical office in Hong Kong. The HKMA requires virtual banks to scrap any minimum account balance or low balance charge to provide inclusive financial services to the public.

Contact editor Han Wei (weihan@caixin.com)