Hong Kong Monetary Authority (HKMA) has just issued the first batch of virtual bank licenses to three companies on March 27. Soon afterwards, Paul Chan Mo-po, the Financial Secretary of Hong Kong stated in a Sunday post blog that, the virtual banking service is expected to be launched within the next six to nine months and the remaining five applications are still under review.

Since the HKMA has disclosed the virtual bank license is one of its seven measures in September 2017, people are eyeing its license application progress. Last Wednesday, the monetary authority issued the first batch of virtual bank licenses to three companies, they are Livi VB Limited, SC Digital Solutions Limited, and ZhongAn Virtual Finance Limited. The granting of these banking licenses took effect immediately.

According to HKMA’s official announcement, the virtual bank disrupts traditional banking to move it beyond brick-and-mortar premises, all its banking services will be delivered through the Internet that mainly targets retail customers, and SMEs (small and medium-sized enterprises).

Paul Chan Mo-po, the Financial Secretary of Hong Kong emphasized that “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 center.”

He also mentioned that the virtual bank is still an emerging financial product, it will have no physical branches and rely on the Internet for customer acquisition.

Chan suggested that virtual banks should offer innovative and customer-centric service to attract customers.

Some analysts indicated that financial giants with dominating technical advantages and large user base are more likely to win the first licenses to facilitate their business internationalization.

Nevertheless, from a business perspective, the local financial system of Hong Kong is very mature. As thus, the biggest challenge for virtual banking will be competing with traditional banking services in the market share.