Abstract
Implicit in the promise of virtual banks is the mission of promoting financial inclusion in Hong Kong, through offering increased accessibility and brand-new customer experiences through the internet which are said to be easier, more personalised and customer-centered. Nevertheless, while regulators encourage using technological solutions to reduce barriers to access and friction, there is a need to strike a balance between promoting technological innovations, protecting customers, and enhancing the returns to investors. Through the content analysis of the recent speeches and guidelines from Hong Kong Monetary Authority and the financial inclusion report from the United Kingdom, it is observed that the regulation of virtual banks in Hong Kong tends to focus predominately on promoting technological innovations. This is unlikely to be sufficient to replicate the trust and confidence in the traditional banking environments due to the lack of consideration to incorporate human factors between banks and clients. This paper articulates the importance of improving the following three areas which could be incorporated into future amendments to future regulatory guidelines: First is to review and accommodate the differences in the bank-customer relationship under the new interaction model. Second is to enhance transparency and disclosure of the technology involved in virtual bank operation. Third is to provide greater assistance to customers to improve their comprehensiveness of the increasing complexity of bank operation, particularly for those who do not have high financial literacy and those who might be discouraged from making an enquiry due to lack of human interaction with the banks. These would improve accessibility and make a meaningful impact to financial inclusion through the launch of virtual banks in Hong Kong.
Highlights
As technology has continued to develop and permeate every aspect of our lives including banking, policy makers including the Hong Kong Money Authority have latched onto virtual banks as one of the ways to promote financial inclusion
While regulators encourage using technological solutions to overcome barriers to access, lower fees, and reduce friction, they may come short on promoting financial inclusion
There is a need to strike a balance between promoting technological innovations, protecting customers, and enhancing the returns to investors
Summary
As technology has continued to develop and permeate every aspect of our lives including banking, policy makers including the Hong Kong Money Authority have latched onto virtual banks as one of the ways to promote financial inclusion. There are three groups of the Hong Kong public that fall into this category, the poor (who have 5% lower rates of bank account ownership than the rich), the elderly and low-income retail customers (HKSAR, 2019); ii) those who can access basic banking services, but lack access to other types of financial service products beyond basic banking facilities, such as loans and insurance (that is, the under-banked); and iii) those who may already have access to banking, but face challenges that limit or reduce their access over time, such as due to high account keeping fees, overly difficult customer due diligence requirements (HKSAR, 2019), and difficulty in physical access such as wheelchair access to branches, availability of braille, documents in languages other than Chinese or English etc.
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