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Virtual Banking Frenemies in Hong Kong


I hate traveling after an airline incident. Regardless of the quality of the in-flight service, my journey is tainted with general unease at thirty-five thousand feet. Though it’s unfair to make the association, the experience is corrupted from something that occurred on another plane and most likely a different airline. Virtual banks in Hong Kong may face a similar dilemma.

I recently spoke at an event organized by the Hong Kong Institute of Bankers. The timing was opportune as the regulator had just granted licenses to the first cohort of virtual banking applicants. As my team was one of the first, I was asked to discuss the risks associated with this type of purely digital/branchless model, the belle of the ball in retail banking.

I touched on common issues such fraud and cybersecurity. More importantly, I spoke about how the nascent industry in Hong Kong could either benefit from collective success or falter from the stumbles of a peer. Let me explain.

Following my talk, four more were granted entry into the market, bringing the tally to eight vying for the business of customers with multiple pre-existing banking relationships. But none like ours.

That matters because we are unforgiving towards the guardians of our livelihood. It’s the most demanding relationship with no margin of error. What’s more, banking is the textbook case for conservatism; our industry only considered innovation once the fintech barbarians came knocking at the gate. When the conventional paradigm is uprooted with a radically new delivery model, one devoid of human interaction and branches, the task becomes more daunting. Take the UK for example: though challenger banks enjoy popularity, customers still don’t trust them as their primary bank account.

And if something goes wrong, the contagion may spread. Imagine a scenario where technical difficulties prevent access to accounts. The bad experience may taint the public’s view of the concept just like I hate flying after an incident. Hong Kongers are also not the biggest fans of mobile banking, with only 30% having used it according to a survey by J.D. Power; slip-ups won’t help. Finally, it may also fuel apathy as this market is well served and crowded with numerous banks.

This a factor of Hong Kong’s unique situation. If all eight begin operations in close proximity to one another, they will likely be judged in unison. It’s not often so many banks launch in a short window after garnering extensive press coverage over the course of a year.

Simply put, for virtual banking to take, the upstarts must all put on a flawless performance. At least in the beginning when the public is introduced to the concept. If one stutters, all will feel the repercussions.

What’s good for the goose is good for the gander, so the saying goes. Nowhere is this truer than in Hong Kong’s virtual banking environment.

The thoughts and opinions expressed here are exclusively my own and do not reflect the views of others.


© 2020 by Abraham Tachjian

The thoughts and opinions expressed here are my own and do not reflect the views of my employer.