The first three licences have been doled out to Livi VB Limited, SC Digital Solutions Limited and ZhongAn Virtual Finance Limited, with all three expected to go live within the next six to nine months.

Norman Chan, chief executive of the HKMA, says: “The introduction of virtual banks in Hong Kong is a key pillar supporting Hong Kong’s entry into the Smart Banking Era. It is a major milestone in reinforcing Hong Kong’s position as a premier international financial centre. I believe that virtual banks will not only help drive fintech and innovation, but also bring about brand new customer experiences and further promote financial inclusion in Hong Kong."

Livi VB, co-owned by Bank of China (Hong Kong), JF Digits and Jardines; SC Digital Solution, a joint venture between Standard Chartered, HKT, PCCW and Ctrip; and Zhong An Virtual Finance, a joint venture between ZhongAn Online and Sinolink were among 29 institutions that applied for banking licences from the HKMA.

Mary Huen, CEO of Standard Chartered (Hong Kong), says: “As the oldest note issuing bank in Hong Kong, Standard Chartered has been serving the community for 160 years. Today, we are delighted to be among the first to receive a virtual bank licence from the HKMA and we are excited to partner with PCCW, HKT and Ctrip Finance. The strengths of our partners combined with our own rich banking expertise mean that we are in a strong position to provide diverse financial solutions to redefine the banking experience for customers in Hong Kong.”

Hong Kong is not short of banks, with the number of licenced institutions operating in the territory now standing at 155, but the HKMA is pushing to play catch-up with neighbouring countries in spurring a culture of innovation-driven competition.

Fergus Gordon, a managing director at Accenture who leads its Banking practice in Asia Pacific and Africa, believes the new competitors will force local banks to up their game in the delivery of improved banking services to customers.

“The UK market, where neobanks and digital-only challengers have been around for a while, shows there’s a big chance new players will grab a significant chunk of new financial services revenue in the near future in Hong Kong, but that doesn’t mean all is lost for traditional banks here," he says. "Virtual banks will need some years to establish themselves, then there will likely be some consolidation among some of the players, and in the meantime, traditional players should continue to rapidly reconfigure their branch networks to become more focused on experiences and use technology to make the transition from digital to physical and back much more seamless."