Youth IDEAS on virtual banking

Virtual Banking

This study looks at ways to facilitate young people’s access to financial services through virtual banking. It is believed to have greater capacity for providing services to small and medium enterprises and to people with little capital and low incomes.

Virtual banking, which delivers retail services through the internet or via other electronic channels instead of at physical branches, is increasingly popular around the world. To facilitate FinTech and to promote financial inclusion, the Hong Kong Monetary Authority granted eight virtual banking licences last year and two such banks have already been officially launched.

Key points from respondents in the study

● 73.0% know of virtual banks ● 63.6% think that the benefit of virtual banking is its speed ● 35.0% recognize the benefit of its 24-hour service ● 24.6% say the bonus is accessibility anywhere

Out of a possible total of 10, they gave it the following number of points: 5.35 electronic transaction system 4.77 confidence in depositing cash 4.72 regulation 4.55 security

Report No.51 HKFYG Youth I.D.E.A.S.

Employment and Economic Development group

Published title Facilitating Young People’s Access to Financial Services through Virtual Banking

Participants/respondents 525 Hong Kong youth aged 18-39 were polled. 20 active bank service users and business operators in Hong Kong aged 18-39 were interviewed.

More details in Chinese yrc.hkfyg.org. hk/2020/07/03/yi051/ On the other hand, interviews revealed problems with physical banking services among active young bank users and business operators. Experts said that virtual banks may provide them with a solution since overheads are greatly reduced in virtual banking because they need no physical premises and are based on new technology. Problems with physical banking

● denial of access to certain services due to low balances ● high minimum thresholds for investment products ● difficulty getting small loans ● bad experience with online services Comments from Youth I.D.E.A.S. think tank members

William Du, deputy group convenor “Young people and startups can access more diversified financial services through virtual banking thereby improving their financial literacy. The Hong Kong Monetary Authority and the Privacy Commissioner for Personal Data should enhance confidence in internet security among members of the public. They should also strengthen public education about personal privacy protection and explain to the public that both virtual banks and physical banks need to comply with the same privacy regulations.” Keith Leung, group member “Intelligent self-help and financial analysis may soon be available via virtual banking. Recommendations to clients using artificial intelligence and big data analysis are recommended but similarly not yet offered. Nevertheless, by understanding their own financial needs and the risk levels they can tolerate, clients can plan their finances better. Regulatory bodies should also study ways of providing a better environment for virtual platforms given the present mature development of FinTech. Allison Chan and Ken Yung, group members “Virtual banks should provide discounts to encourage merchants to try electronic payment services. They can provide channels for cash and cheque deposits during the transitional period from cash to non-cash transactions. In addition, virtual banks should develop accounting systems that match the daily operations of both startups and small and medium enterprises as well as providing complete electronic transaction records for business use.”