Adoption of Virtual Banks and Insurers

Adoption of Virtual Banks and Insurers 16 Overview of Virtual Banks and Insurers These new entries to the finance industry are based on different business models which shape their mix of product offerings, target audience, and marketing channels. In the meantime, many traditional banks and insurers are transforming themselves into a more digital-savvy operator. Furthermore, they are offering new products and services to compete with those offered by virtual banks and insurers. There are many views – sometimes conflicting – on the relative advantages of incumbents over their virtual counterparts and vice versa. However, there is little empirical evidence to support (or refute) these different perspectives. Understanding the views of potential adopters of virtual banks and insurers is critical for these new entries. These views will help to adjust their business models to better align with public perception, or may help to devise campaigns to change users’ perceptions and beliefs. As experimentation is a driving principle underlying the business models of new entries, virtual banks and insurers can benefit from an economy-wide study of user perception. This Study could also supplement the findings from their own market surveys and research studies. Incumbents will also benefit from a deeper understanding of market response to the new entries. They can more accurately identify the leverage points of an incumbent (e.g., strong brand built over years of operation, physical presence), in their delivery of services and formulation of marketing and branding campaigns. Incumbents can also better understand their market positioning as perceived by the public relative to virtual entries. This Study aims to provide up-to-date information to regulators to monitor market responses and fine-tune the regulatory environment, so as to ensure a healthy and sustainable development of Hong Kong’s finance industry. While regulators typically work closer with the supply side of financial services to ensure stability of the economy and its sustainable growth, they could also benefit from timely market responses in charting policy for the common good of society. By matching supply- side practice and the demand-side perception and behavior, regulators can more effectively assess their policy instruments and regulatory framework to achieve societal goals and objectives.