OPINION – The rise of virtual banking in Hong Kong: Will Macau come next?

After each major crisis, Hong Kong has always emerged stronger, and this time it will be no different, since Hong Kong is ready to grasp any opportunity that promises to secure its regional financial dominance. 

*By Oriol Caudevilla


Over these last few years, Hong Kong has been developing itself into a leading FinTech hub. EY reported that Hong Kong enjoyed a 67 percent consumer fintech adoption rate as of 2019, a figure which climbed rapidly from 32 percent just two years prior. Hong Kong’s fintech industry has the potential to develop much faster now by leveraging its involvement with the Greater Bay Area (same as Macau), and also now that COVID-19 is changing consumer behavior and turbocharging Hong Kong´s FinTech revolution, forcing Hong Kong’s banking and financial services industry urgently to adapt.

One of the areas boosting the pace of digital transformation is that of virtual banking. In March 2019, the Hong Kong Monetary Authority (HKMA), Hong Kong´s de facto central bank, announced the issuance of the very first virtual banking licenses. This came after the publication by the HKMA of the “Guideline on Authorization of Virtual Banks” in May 2018.

Virtual banks, also called neobanks, primarily deliver retail banking services through the internet or other electronic channels instead of physical branches. The HKMA believes that the development of virtual banks will promote FinTech and innovation in the region and offer a new kind of customer experience by helping to promote financial inclusion, since neobanks normally target the retail segment, including the small and medium-sized enterprises (SMEs).

As of today, 8 virtual banks exist in Hong Kong after having been approved by the HKMA, even though not all of them are already operational: Airstar Bank (its services were launched in June to the public), Ant Bank (which operates also in Macau and is seeking a license to do so in Singapore), Fusion Bank (currently conducting internal testing), livi Bank (which opened its virtual doors in August), Mox Bank (launched just a few weeks ago, in late September), Ping An OneConnect Bank Limited (it started its pilot trial in June under the Fintech Supervisory Sandbox -FSS- of the HKMA), WeLab Bank (launched in late July), and ZA Bank (which officially opened in March, thus becoming the first virtual bank in the region).

(Xinhua/Wu Xiaochu)

Hong Kong´s eight virtual banks are a key pillar for the coming smart banking era and are a clear example of how digital transformation has become a top priority.

Will these virtual banks extend to Macau? Macau, more than ever, is in a perfect position to take the opportunities offered by virtual banking. Even though many people still (wrongly) think of Macau as just a gaming hub, the truth is that the former Portuguese colony is attempting to diversity its economy and become competitive in many more areas.

Same as Hong Kong, Macau is part of the Greater Bay Area project, which has a combined population of over 69 million people and a GDP of around US$1.5 trillion (comparable to that of the Tokyo Bay Area and the New York Metropolitan Area), offering opportunities like the Wealth Management Connect Scheme.

On top of that, Macau’s inhabitants have showed zero interest in challenging the status quo. When Ho Iat-Seng was sworn in by President Xi as the new Chief Executive, he vowed that his government will continue to fully and accurately implement “one country, two systems” by strictly following the PRC Constitution and Macau’s Basic Law and safeguarding national sovereignty.

Furthermore, Macau will try to diversify its economy by creating a new Nasdaq-like stock exchange denominated in yuan facilitating fundraising by technology companies from the Bay Area, and by embracing the Belt and Road Initiative too, which offers many opportunities to Macau due to its belonging to the Portuguese-speaking world.

This need to diversify Macau´s economy has become clearer now in early October during the Golden Week, when less people visited the SAR than expected (the number of visitors arriving in Macau over the first three days of the October Golden Week holiday period fell 87.2% year-on-year, with just 58,345 people crossing the border between Thursday and Saturday), therefore Macau should follow Hong Kong´s path in embracing Fintech.

Will virtual banks be part of this FinTech transformation in Macau? Indeed. So far, only 2 virtual banks operate in the region: Ant Bank Macau, launched last year, and the Macau Development Bank. The Financial System Act, passed in the 1990s, does not specifically set out rules for virtual banking business, but lenders are allowed to conduct online business.

To sum up, given the current tense economic situation worldwide, it is in both Hong Kong’s and Macau´s best interest to grasp every opportunity, and FinTech offers undoubtedly many opportunities, being virtual banks a key pillar of digital transformation.  Nevertheless, when compared to Hong Kong, Macau faces significant challenges in any future transformation into an international financial center, but it is on the right track to get there. Embracing virtual banking would be a good stepping-stone.


The author holds an MBA and a doctorate in Hong Kong real estate law and economics. He has worked as a business analyst for a Hong Kong publicly listed company and he has given seminars at HKU on Shadow Banking in China and at several universities in Macau on China´s new digital yuan. He is currently a member of the Blockchain, Digital Banking and Greater Bay Area Committees at the Fintech Association of Hong Kong (FTAHK).