BOCHK’s virtual bank is a new paradigm that transcends old business models
- Livi VB to initially rely on interbank lending, but will later also fund its loans using customer deposits
Livi VB, the new virtual banking arm of Bank of China (Hong Kong), is a different type of business model, one that transcends the orthodox corporate paradigm whereby businesses look for a break-even point in the first few years, because the marginal cost of investment is very low, the bank’s chief executive said on Thursday.
“Despite the initial investment being significant, a virtual bank could operate on much lower marginal cost compared with that of a traditional bank,” said Gao Yingxin, who is also the bank’s vice-chairman.
He said as virtual banking was still a novelty in Hong Kong, in the initial years of operation he also does not expect Livi VB to generate high returns. The other shareholders in the joint-venture are JD Digits and Jardines.
Gao, who was speaking after the bank’s annual general meeting, said it was on track to rolling out services within six to nine months as indicated when it first received its licence in March. That would put its launch date to September this year, at the earliest.
Livi VB is among eight applicants that were awarded virtual banking licences by the Hong Kong Monetary Authority (HKMA). Arthur Yuen, the HKMA’s deputy chief executive, has said he expected virtual banks to compete with traditional ones.
