Since the issuance of the first round of virtual banking licenses in Hong Kong during the pre-pandemic days of May 2019, digital-based financial institutions have been taking root in the city. With the recent launches of Standard Chartered’s “Mox” and Ant Group’s “Ant Bank”, Hong Kong residents are slowly being exposed to a growing list of new age banks free of legacy systems and with offers ranging from attractive deposit rates to cashback opportunities. To date, six of the eight virtual banks approved by the Hong Kong Monetary Authority (HKMA) have officially launched their services in the territory.

While the interface and functionality of these virtual banks improve the overall banking experience, these financial institutions also need to ensure that their backend processes such as anti-money laundering (AML) and know your customer (KYC) checks are robust.

“The big challenge is how to make banking seamless when you have this compliance obligations,” explains Bharath Vellore, managing director, Asia-Pacific, at technology firm Accuity. “That’s the complexity that we are currently working in where financial institutions don’t want the customer experience to be affected but at the same time comply with all the regulations.” The balance was something Accuity wanted to achieve when it partnered with ZA Bank, the first virtual bank to launch in Hong Kong.

Managing customer experience while complying with checks and balances is something that all virtual banks will need to face at some stage, particularly when they decide to offer slightly more sophisticated lending or investment solutions. Key to this is being able to determine accurately the appropriateness of such a solution to a customer.

“We like to help banks with a risk-based approach where you don’t have a single policy for all your customers. This is not the most efficient way and often you would go for the lowest common denominator approach and say no to a lot of business which you actually could’ve been able to do,” warns Vellore.

In any case, this is something that all up and coming virtual banks need to keep in mind in the coming years with the increasing need for digital banking services amid the Covid-19 pandemic. Aside from Hong Kong, other markets in Asia such as Singapore, Taiwan and Thailand have expressed interest in developing virtual bank ecosystems to meet the growing needs of digital natives in their respective jurisdictions.