Digital insurer ZhongAn Online could launch its first virtual banking services in Hong Kong in just six months’ time, ZhongAn International founding member Ken Lo said.
ZhongAn, applying through its international subsidiary, was awarded a virtual banking license from the city’s financial regulator in March. It was one of eight major regional players who received one of the new licenses, out of a total 29 rumoured to have applied. The bank will operate under the name ZhongAn Virtual Finance.
Virtual banks, such as Monzo and Starling in the UK, offer the same services as traditional banks without operating any physical branches, and are estimated to eat as much as 30 percent into the revenues of traditional lenders in Hong Kong.
Compared to other countries, the city has been slow to welcome virtual banks into its traditional banking sector. For comparison, Monzo received a banking license in April 2017, while Hong Kong only began granting equivalent licenses to online-only banks in March this year.
Many of the city’s financial veterans, including Standard Chartered bank, wasted no time in forming virtual banking ventures once the HKMA signalled they would relax regulations, while other regional firms and fintechs, such as China-based ZhongAn, are using the opportunity to diversify and expand beyond home markets.
Speaking to Techerati, Lo said the new licenses herald a new era of financial innovation in the city:
“Virtual banking will bring something different to the Hong Kong market, not only a more digital way for the users to connect with banks, but also a better service and higher demand for the banks,” he said.
“It’s never easy to kick off a financial revolution project, especially in a mature market like Hong Kong. Even though virtual banks, challenger banks and similar started to spring up many years ago in other countries, each market varies from each other.”
Collaboration is key
ZhongAn Online, brainchild of Ping An, Tencent and Alibaba, refers to itself as China’s “first truly digital insurer” and has taken the country by storm since launching in 2013. In its first year of operation, it underwrote 630 million insurance policies and serviced 150 million clients.