Adoption of Virtual Banks and Insurers

Adoption of Virtual Banks and Insurers 75 Looking Ahead The arrival of virtual banks and insurers is expected to fundamentally transform Hong Kong’s finance industry by raising its overall levels of innovation and technology adoption. These new virtual operators began to roll out their services in the first half of 2019. The current Study offers a snapshot of their development. The findings reveal that virtual banks and insurers are still in the initial phase of transforming their respective industries. They are trying to differentiate themselves from incumbents by adopting new brand names and entities, and promoting themselves as faster and more tech-savvy and innovative. In response to the potential loss of market share brought by these new entries, traditional banks and insurers have launched their own digital platforms. Several traditional banks have greatly simplified their KYC and bank-account opening processes. They have also become more efficient with loan applications and investment advice by using advanced technologies, such as artificial intelligence and big data. As a result, their customers now benefit from a wider range of product options and more efficient banking services. Major insurers are also investing in their own digital insurance platforms. They are making use of technology to assist insurance agents and brokers when interacting with clients and to improve internal procedures. Although their online client platforms may not yet be fully automated, progress is being made in this direction. Due to the COVID-19 pandemic and other events during the year, Hong Kong’s GDP shrank by 8.9% 14 year-on-year in the first quarter of 2020. The HKMA has introduced a number of measures to support the city’s 340,000 SMEs, including advising all banks to provide a six-month repayment holiday starting from May 2020. 15 Because of these difficult conditions, some virtual banks have delayed launching their services. However, the public has been spending more time at home and the changes to customers’ purchasing patterns have resulted in an increased use of digital platforms, thereby encouraging the adoption of fintech. In fact, some insurers have reported that business has grown among local customers, especially in health insurance. To survive and thrive in the digital environment, virtual banks and insurers need to develop more innovative products, by making greater use of automation and more sophisticated technologies. An economy-wide personal identity infrastructure would also help to expedite the diffusion of online financial services to all residents of the city. 14 Hong Kong Economy, by the Government of the HKSAR, https://www.hkeconomy.gov.hk/en/situation/development/index.htm 15 Hong Kong Monetary Authority, Media, https://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2020/20200417e1.pdf