Standard Chartered Bank sees virtual bank licence as ticket to new business worldwide

Standard Chartered Bank sees its decision to apply for a virtual banking licence in Hong Kong – the first traditional bank in the city to do so – as opening up new areas of growth both in the city and overseas.

The Hong Kong Monetary Authority (HKMA) is poised to issue the city’s first virtual banking licences by the end of the year to promote fintech and tap into the growing trend for online finance.

Some 60 companies, also including online payment operator Yedpay! and online lender WeLab, have said they are interested ahead of an August 31 deadline for applications.

“We decided to apply for a virtual bank licence as we believe virtual banking is full of new opportunities and has a lot of room for development,” said Mary Huen Wai-yi, the bank’s chief executive in Hong Kong.

“For existing customers of Standard Chartered, they would have more choice when using new virtual banking services. The licence would be a new engine to attract new customers,” she said, adding that the bank would be looking at the mainland China market too should regulators there allow mainlanders to access its virtual bank.

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The term virtual bank refers to banks that operate purely online without any physical branches. Most of Hong Kong’s other traditional banks. including HSBC, DBS and Citibank, have not indicated an interest in applying for a licence as they already have big branch networks and digital banking services.

“While we have not planned to apply for a virtual banking licence, we will be taking part in this space by rolling out a new purely digital-based banking segment to cater to digitally savvy consumers,” said Priscilla Ng, head of digital banking at Citibank.

Huen said that even though Standard Chartered has one of the largest branch networks in Hong Kong, with 74, virtual banking offers new options.

“Standard Chartered already has well established traditional banking services which will enable us to develop the virtual bank as a new business line,” she said.

Huen declined to disclose details of the amount of investment in and the business model of its virtual bank, as the licence application is still in process. She said only that the virtual bank would be run separately by a new team, independent of the traditional banking operations. The virtual bank would also link up with technology, retail and other partners to offer new services in Hong Kong and overseas.

“Our virtual bank will focus on the retail client segment. Overseas virtual bank experiences have shown that virtual banks would usually target certain client segments and do not need to cover a wide spectrum,” she said.

Physical branches, however, would still be a part of the bank’s operations, though staff would have to learn digital skills.

“Branches would still play an important role, but their role has been changing from the traditional way. Customers now seldom go to branches for simple transactions such as depositing or withdrawing money. They go to branches for more complicated services or they want the bank branches to solve their digital banking problems,” she said.

“As such, the coming of virtual banking will not kill off the need for physical bank branches. We will still need talented staff at branches but their skill sets would need to change. Staff at branches will need to have sufficient digital banking knowledge to help customers,” she said.

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