[ET Net News Agency, 7 February 2018] HKMA released new guidelines for licencing
virtual banks for public consultation. Both financial and non-financial (including
technology) companies can apply for this licence.
Morgan Stanley said this presents a risk for HK banks' market shares and profitability,
implying banks need to improve payment and other delivery systems quickly.
It expects technology companies to take the lead in setting up these banks in HK, given
the profitability of the retail base in the territory. It also expect a new player, with
significant financial backing, to be able to show a credible medium-term plan despite
significant losses near term.
Morgan said the oligopolistic market in Hong Kong has helped banks earn disproportionate
profitability. It does not see an imminent threat to this profitability, and hence
maintained its "overweight" on large HK banks (HSBC, Hang Seng Bank, BOCHK).
However, if new players offer vastly superior products to incumbents, they will gain
share, affecting the larger players' profitability in the medium term, Morgan said.
Technology initiatives have been less obvious in Hong Kong compared with other large Asian
markets, and this will need to change, the research house believes. (KL)