Photo:VCG

The first virtual bank started a trial run in Hong Kong on Wednesday, allowing bank customers to experience more innovative banking services and marking a new milestone for Hong Kong's banking industry, said a Hong Kong finance official.

The pilot virtual bank will operate in the fintech supervisory sandbox of the Hong Kong Monetary Authority (HKMA), after eight licenses were granted to virtual banks in the first half of the year, said Arthur Yuen, deputy chief executive of the HKMA.

A supervisory sandbox refers to testing grounds for new business models that are not protected by current regulations in the digital economy arena.

Virtual banks have aroused public attention as the first trial run involved some 2,000 interested members of the public as the first batch of users. And quite a few other institutions have expressed an interest in applying for a license, which Yuen said suggests strong market confidence in the industry's prospects.

During the trial run, the HKMA will closely monitor its operation and the virtual bank will be allowed to formally launch its business if the trial run is satisfactory and it can meet all the relevant regulatory requirements of the HKMA.

The main differences between virtual and conventional banks lie in the mode of operation and service delivery, Yuen said.

Virtual banks do not have physical branches and instead deliver all services via the internet and they do not impose minimum balance requirements or low-balance fees on customers. 

Retail customers and small and medium-sized enterprises are the target customers of virtual banks because virtual banks will leverage financial technologies to offer more personalized products and services.

While the HKMA has put in place a number of regulatory requirements for virtual banks regarding technology risk management and data processing, Yuen also warned the public to exercise due care and to safeguard their own personal information when using virtual banking services.