Tencent and Ant Financial latest firms to be awarded virtual banking licenses in Hong Kong

Industrial & Commercial Bank of China and Xiaomi also awarded licenses by Hong Kong’s financial regulator

The race to disrupt Hong Kong’s traditional banking sector is heating up with four new major companies winning licenses to create virtual banks in the city.

The latest players to be granted licenses are Tencent Holdings Ltd., Ant Financial, Industrial & Commercial Bank of China Ltd. and Xiaomi Corp. The latest approvals follow three licenses granted in March to a variety of joint ventures backed by the likes of Standard Chartered, Ctrip and ZhongAn.

Tencent is partnering with ICBC’s Hong Kong Unit, HKEX, Hillhouse Capital and Perfect Ridge in a venture called Infinium Ltd. Xiaomi and Ant received their permits via local entities.

The four virtual banks plan to launch their services in six to nine months. In a statement, HKMA said it will “closely monitor” their operations once they have commenced business.

Norman Chan, chief executive of the HKMA, said: “We are pleased to grant four more virtual banking licences today. The HKMA is now working closely with the 8 virtual bank licensees to prepare for the launch of their business operations in accordance with their plans.”

Virtual banks, such as Monzo and Starling in the UK, offer the same services as traditional banks without operating any physical branches.

The banks are estimated to eat as much as 30 percent into the revenues of traditional lenders in the city, many of which have formed virtual banking ventures themselves in anticipation.

Other regional firms are using the opportunity to expand beyond home markets.

Compared to other countries Hong Kong has been slow to welcome virtual banks into its traditional banking sector. For comparison, Monzo received a banking license in April 2017, while Hong Kong only began granting equivalent licenses to online-only banks in March this year.

Speaking to Techerati ahead of his appearance at Cloud Expo Asia in May, founder of mobile payments giant QFPay Tim Lee, said he is excited to see how the virtual banking space develops in Hong Kong.