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Virtual Banking, welcome to the new smart banking era


The Hong Kong Monetary Authority (HKMA), has just granted 4 more virtual banking licenses this month after issuing its first 4 licenses in March and April this year. HKMA expects within 6 months, customers with smart phone on-hand would be able to utilize bank services with a swipe of finger in the coming smart banking era.


When it comes to fintech, Hong Kong is a bit late on the bandwagon. In Europe, a number of neobanks (financial technology firms that offer digital or mobile-only financial services) like Monzo, which has already accumulated more than 17 million users in the UK since they started operating 4 years ago,  were already granted banking licenses. Mainland China also has Mybank and Webank, and digital payment used literally everywhere.  


A lot of people may have the same question in mind, what is the difference between virtual banking and digital banking, do we simply categorize all online banking services as a part of virtual banking? Indeed, digital banking is incidental to virtual banking, which harbors a much broader scope. First concept of virtual banking is it utilizes Fintech-big data, AI and blockchain-to deduce and analyze customers’ needs to tailor-make financial plan. For target marking, banks could break a market into segments based on big data and concentrate marketing efforts to certain customer groups. They could also response swiftly to the latest market demand or trend in launching new financial products. On top of just an online banking experience, virtual banking would be the 24-7 one-stop-shop for anything (from shopping, entertainment, transportation, personal and corporate operation) where transection is involved. Finally, it would serve to cater the need of younger customers and SMEs as there is no minimum account balance requirement. 


Being said so, with the convenience virtual banking bring, we should be well aware of the pitfalls that comes along.  Peripherally speaking, virtual banks offer services on the internet instead of through physical retail branches. This does make access to banking service a lot easier for us customers as it means the days of queueing up at your local bank is gone. Yet by the same token, it also pinpoints to the need for more advanced cybersecurity. As zero face-to-face contact with banking staffs means knowing your customer (KYC) prone to be more difficult.  KYC has to be made electronic using multi-factor authentication (MFA), identity proof or even face recognition. Transunion’s security flaw resulting in the leak of credit history of 5.4 million local customers and the date breach of Faster Payment System (FPS) last year should give us all a glimpse of what could have happen if the first gate of defense is not done properly

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