Hong Kong residents can expect to benefit from cheaper and better banking services with the launch of more virtual banks this year, according to high-profile speakers at the Asian Financial Forum. Their comments came as it was revealed the Hong Kong Monetary Authority has hit an important milestone in its efforts to promote financial technology (fintech). Half the population of the city has now signed up to its Faster Payment System, which enables the free transfer of money between bank accounts via mobile phone. The development shows Hong Kong is moving quickly into a new era of branchless banking, a shift that brings up challenges for traditional lenders which must innovate to cope with the competition, said officials at the annual conference held by the Hong Kong government. “The Faster Payment System is an important move for the city to develop its fintech. The system has been very popular with the Hong Kong public,” said James Lau, Secretary for Financial Services and the Treasury during a panel discussion at the forum on Monday. The electronic interbank payment system introduced by the HKMA in September 2018 now has half of the local population registered and average daily transaction volumes of between HK$2.4 billion (US$308.82 million) and 38 million yuan, Lau said. The system allows anyone to sign up with their mobile phone number or email address and transfer money between different bank accounts. They can also make payments at shops and restaurants using QR codes on their smartphones. “The next major development is the launch of more virtual banks in the first quarter of this year in Hong Kong, which will provide more online banking services to the public,” Lau said. The Hong Kong Monetary Authority has issued eight virtual bank licences since March last year. The first virtual lender, ZA Bank, started operating in December. Virtual banks’ profitability hinges on their ability to harness payroll, says KPMG ZA Bank on Monday invited people who had registered on its website to open an account. It is offering a 6.8 per cent interest rate for three-month time deposits of up to HK$100,000 during a promotional period that runs until February 26, according to an email seen by the South China Morning Post . That is a very competitive rate when compared with traditional banks, which are offering interest rates for large deposits at 2 to 3 per cent. However, ZA Bank is only accepting a maximum of 2,000 clients for the special offer. It has also invited customers to apply for cheap loans. It is offering an annualised rate of 0.18 per cent for a loan between HK$5,000 and HK$50,000 to be paid back over a six-month period but, again, this is limited to 500 clients who received a special email invitation from the bank. Most of the other seven virtual banks are expected to launch their operations in the first half of this year. The Monetary Authority of Singapore will also issue five digital bank licences, a move set to pile more pressure on traditional lenders. Pin-striped suit banking is so 19th century; virtual banks demand IT-savvy staff “The banking industry will need to innovate and upgrade its technology to cope with the many challenges amid the US-China trade war, geopolitical tension and the global economic slowdown,” said Arthur Yuen, deputy chief executive of HKMA in another panel discussion at the conference. Yuen said the launch of virtual banks will benefit the public as a whole because it allows people who have never had a bank account to finally enjoy banking services. Martin Raiser, country director for China, Korea and Mongolia at World Bank, said virtual banks can benefit the majority of people in underdeveloped nations. In many such markets in Asia and Africa, half of the population do not have bank accounts. There are often more people with mobile phones than people with bank accounts. “About two thirds of these populations are women and many are low-income earners. The virtual banks, which use technology to operate at a low cost and hence can offer cheaper banking services, will help improve financial inclusion and benefit a lot of people in these markets,” Raiser said in the same panel session as Yuen. Purchase the China AI Report 2020 brought to you by SCMP Research and enjoy a 20% discount (original price US$400). This 60-page all new intelligence report gives you first-hand insights and analysis into the latest industry developments and intelligence about China AI. Get exclusive access to our webinars for continuous learning, and interact with China AI executives in live Q&A. Offer valid until 31 March 2020.