The world of virtual banking will see strategic partnerships between banks and fintechs: KPMG

Hong Kong’s financial services industry is likely to move towards an ecosystem of traditional banks collaborating with innovative start-ups, technology and telecom companies, forging strategic partnerships and adopting fintech solutions to enhance service offerings, according to KPMG.

The introduction of a new licensing regime for virtual banks by the Hong Kong Monetary Authority this year, which deliver retail banking services through the internet or other electronic channels instead of physical branches, is a significant factor in bringing a new era of smart banking to the city. The city’s de facto central bank has set a deadline of August 31 for receiving applications for the first batch of virtual banks.

The initiative is designed to give new players – non-banks – a level-playing field to set up banking operations to supplement their existing non-financial services to enhance customer-focused digital services, said Paul McSheaffrey, partner and head of Hong Kong banking at KPMG China, in an interview.

By adding a range of financial and payment services from cinema ticket purchases to booking taxis on to their core messaging and gaming businesses, Tencent Holdings’ WeChat Pay and Ant Financial Services’ Alipay have become the primary platforms of choice and are winning the competition against traditional banks to engage Chinese retail customers in financial services.