Adoption of Virtual Banks and Insurers

Adoption of Virtual Banks and Insurers 15 Overview of Virtual Banks and Insurers Background A key motivation of the Study is to understand the beliefs and perceptions of the public towards virtual banks and insurers shortly after their debut. In the first half of 2019, the Hong Kong Monetary Authority (HKMA) issued eight virtual bank licenses for the first time. Amid the COVID-19 pandemic in the first six months of 2020, a number of licensed virtual banks began to roll out services and soft launches to the public. As of August 2020, four new virtual insurers have received licenses from the Insurance Authority (IA); they began to launch their services one by one since April 2019. More virtual banks and insurers are expected to enter the market and a mid- course assessment on the market response to these new entries seems timely. From a policy standpoint, introducing virtual banks and insurers in Hong Kong aims to promote financial innovations and to transform Hong Kong into a technology and innovation-based economy, so as to sustain the city as a global financial center. Therefore, it is imperative to understand how the public respond to these new entries and their product offerings. So far, research has been focusing on the supply side of digital finance services. The Hong Kong Institute for Monetary and Financial Research (HKIMR) recently published a report 3 on the adoption of fintech and innovation in the banking industry. It reported a rising trend in the adoption of technology-based services among authorized institutions as they begin to master the technology and practice of digital finance. However, there is little research on public response and their views towards these new entries of virtual banks and insurers to the financial market. The current study aims to understand (1) the beliefs and perceptions of the public towards virtual banks and insurers at their early stage of development, (2) the challenges facing these new entries, (3) products and services which will appeal to the public, and (4) success factors and measures to facilitate customer adoption. 3 Fintech Adoption and Innovation in the Hong Kong Banking Industry , the Hong Kong Institute for Monetary and Financial Research May 2020