Have you heard “virtual bank”? It is a hot-button keyword amid emerging entrepreneurs.
This trend has begun as follows:
After the HKMA, which is the financial regulatory of Hong Kong, granted eight “virtual banking licences” (VBL) in May of 2018 (1st, 2nd and 3rd batches), the licensees have been working hard to commence by 2020. Hong Kong people expect the new players would compete with the traditional banks, offer low-cost and swift banking services, and relieve the pain of a bank account opening.
However, our clients are puzzled.
During our sales presentation of the affiliated Neat and Currenxie’s Multi-currency Business Account, our customers misunderstand they are registered virtual banks in Hong Kong.
We have to be very clear: We did not mispresent nor associated them as Hong Kong banks.
We suggest Neat and Currenxie to our small business customers because their digital solution is an alternative to a traditional bank account. Their Multi-currency Business Account suits the demand of bank-transfer among the new Hong Kong company, the startups and small business owners, who have been left behind by the conventional banks.
However, the confusion signifies that we failed to spread the alternative banking solution to all of our customers. Right now, we want to make sure people know what the virtual bank is.
Virtual banks as Hong Kong licensed banks
The HKMA needs to maintain the equal safety level of the virtual banks as the conventional banks, so the virtual banks are under the regulation of the identical set of requirements as those incumbent banks. The Hong Kong virtual banks must follow the same standards on the mater of Anti-Money Laundry (AML) and Counter-Terrorist Financing (CTF), Know-Your-Client(KYC) / due diligence compliance, capital requirement, and board members requirement.
Talking about the capital requirement, virtual banks have to maintain HK$300 million of capital, same as the traditional bank. (Reference)
Regarding the due diligence compliance, virtual banks should have the same structures of their compliance team as the conventional banks.
Virtual banks as solely digital Hong Kong licensed banks
Since the virtual banks are offering their business solely in the cyberspace, they are required to enact stricter standard on their network security and system redundancy.
Hong Kong Virtual Banking Licence is not for Neat and Currenxie
Traditionally, banking service for startups and young SMEs is not a profitable segment for traditional banks. As Neat and Currenxie are focusing on startups and small businesses, the entry and operation requirement of VBL makes the application is not financially feasible. It would not be profitable for Neat and Currenxie either if they had to operate and take the cost base as licensed banks.
On the other hand, the upcoming virtual banks are unlikely to target Neat and Currenxie’s customers because of their high-cost per customer acquisition.
Neat and Currenxie are responding to the niche market of startups. They spring off by breaking the rules set by traditional banks. For example, their online account opening service is unmatched by the banks. That is the reason why they do not compete with the banks; instead, they survive by volumes.
We expect that Neat and Currenxie’s Multi-currency Business Account is able to help the desperate youth entrepreneurs to kickstart their venture, without the drag of the bank account opening in traditional Hong Kong banks.
Traditional Hong Kong banks usually refuse to open business accounts for new company which does not has background experience of the industry. It is not the case, our Hong Kong incorporation service package can help people to register a Hong Kong company, then you can open the business account online in Neat and Currenxie. Click here for details.