Speaking of virtual banks, some people may still be confused: What is a virtual bank? It sounds so empty, can I trust you? How is it different from traditional banks? It is undeniable that virtual banking is indeed a relatively new concept in Hong Kong, and some people have never even been exposed to it. Just wait for us to answer your questions and let’s find out what is in the virtual bank!
What is a virtual bank?
According to the definition of the Hong Kong Monetary Authority (HKMA), "virtual banks" refer to banks that primarily provide banking services through the Internet or other forms of electronic transmission channels, rather than providing retail banking services through physical branches.
How many virtual banks are there in Hong Kong?
The Hong Kong Monetary Authority has successively licensed eight "virtual banks" since 2019. Currently, there are eight virtual banks in Hong Kong regulated by the Hong Kong Monetary Authority.
No branch? What are the advantages of virtual banks?
- Convenience: Users only need to use a smartphone to open an account remotely by scanning their ID card, etc. They can also use banking services 24 hours a day, without having to wait in long lines at branches like traditional banks. It’s convenient and saves time.
- No minimum account balance charges: Since the Hong Kong Monetary Authority issued licenses to virtual banks, although many traditional banks have abolished minimum account balance charges, there are still some banks that have not made this change. If the user's account balance is lower than the minimum requirement, a handling fee will be charged. However, the virtual bank does not charge any fees regarding the account balance. No matter how much wealth you have, you can open an account worry-free!
- Connecting to other banks: Virtual banks can connect to other banks through FPS and electronic direct debit authorization (eDDA). Inter-bank transfers can be made instantly without additional handling fees, making it faster and more convenient to use.
- Increase market competition: Since virtual banks do not have branches, operating costs are reduced, and resources can naturally be given back to users, such as providing high deposit interest, reducing loan interest, etc. On the one hand, it increases market competition; on the other hand, it can also benefit consumers.
Are customers of such virtual banks protected?
I believe that many people who come into contact with virtual banks for the first time will worry about the risks of depositing money in virtual banks. In fact, virtual banks are strictly regulated by the Hong Kong Monetary Authority! All licensed banks in Hong Kong are members of the Deposit Protection Scheme of the Hong Kong Deposit Protection Board (DPB), so 8 virtual banks, including WeLab Bank, have participated in the Deposit Protection Scheme. Only a few overseas registered banks have other deposit protection schemes. Deposit schemes related to the place of incorporation are protected and are exempted from the deposit insurance policy. Eligible deposits accepted by members of the Deposit Protection Scheme are protected by the Deposit Protection Scheme, with a maximum protection limit of HKD500,000 per depositor. You can refer to the protection coverage of the deposit insurance plan:
Protected deposits include:
- Various common deposit accounts (such as savings accounts, current accounts and time deposits with a term of not more than five years)
- Deposits held by individuals (including joint accounts) or companies
- Deposits used as collateral
Unprotected deposits include:
- Structured deposits (such as foreign currency-linked and equity-linked deposits)
- Time deposits with a maturity of more than five years
- Bearer instrument (such as bearer certificate of deposit)
- Offshore deposits (such as deposits deposited with member banks’ offices in the Mainland or overseas)
Please note that some banks and deposit-taking companies with restricted licenses are not members of the scheme, so deposits placed in the relevant banks or companies are not protected by the deposit insurance scheme!
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