HONG KONG has issued online-only banking licenses to three groups, including joint ventures (JVs) of Standard Chartered and BOC Hong Kong, in what could be the biggest shake-up in years in the city’s retail banking sector dominated by old-guard lenders.

Besides StanChart and BOC Hong Kong joint ventures, the Hong Kong Monetary Authority (HKMA) also issued the so-called virtual banking license to a venture led by ZhongAn Technologies International Group.

The license will give holders access to a lucrative retail banking market in the Asian financial hub, where many consumers are unhappy with the current options.

According to research from Accenture, 43 percent of people living in Hong Kong have a positive experience when visiting their bank branch versus a global average of 57 percent.

“It’s definitely a positive for the Hong Kong market, but the virtual banks have a long way to go,” said Hoi Tak Leung, a senior technology sector lawyer at Ashurst.

“There’s going to be some fierce competition with each other, and with the incumbents, and it is unlikely all will be successful.”

The entrenched position in Hong Kong of established banks, such as HSBC and StanChart, is expected to be a major challenge for the online-only license holders, whose road to profitability could be long.

HSBC, for example, made nearly US$6 billion from its Hong Kong retail banking and wealth management operations last year, a third of total group profits and compared with US$476 million in Britain, its second-most profitable retail banking market.

The newly licensed virtual banks plan to launch services in six to nine months, HKMA deputy chief executive Arthur Yuen said, adding the regulator would process five more applications “as expeditiously as possible.”

Some 33 virtual banking applications were submitted by the deadline of Aug. 31 last year, and the HKMA short-listed eight.

(SD-Agencies)