Adoption of Virtual Banks and Insurers

Adoption of Virtual Banks and Insurers 7 Preface The “Adoption of Virtual Banks and Insurers” (the “Study”) is a study conducted by the Business School of the Hong Kong University of Science and Technology (“HKUST Business School”). It is one of the eight research tasks under the Fintech Theme- based Research Project titled “Contributing to the Development of Hong Kong into a Global Fintech Hub” (the “Project”), funded by the Research Grants Council (project no. T31-604/18-N). Virtual banks and insurers are new entries to the finance market in Hong Kong. Based on novel business models and supported by advanced technology, these new operators are expected to offer a wide spectrum of innovative products and new customer experiences. From a policy perspective, virtual banks and insurers will inject new thinking and practices into the industry, ushering Hong Kong to the next stage of its development as a leading global financial center. Hong Kong’s first virtual insurer rolled out its business in April 2019, and the first virtual bank was launched in March 2020. While it takes time to realize the positive spillover effects of these new entries on the rest of the industry, the market response to their early stage of development will have a significant impact on their growth trajectory and potential. Conducted from May to July 2020, the Study reveals the views and perceptions of the public towards virtual banks and insurers shortly after their services were launched. Data were collected through an online questionnaire sent to a random sample of members of a former Hong Kong government portal. The questionnaire was designed with input from financial institutions and regulators. It elicited responses on a range of topics including the beliefs, awareness, and degree of trust of the public towards virtual banks and insurers, adoption rate and adoption intention, opportunities for virtual entries, what products and services they should offer to appeal to the public, the challenges facing these new entries, as well as the success factors and measures to facilitate user adoption. The demographic distribution of the 2,278 respondents to the survey was broadly reflective of the local working population. The questionnaire responses are presented in this Report, along with key observations and findings. We hope that the findings of this Study will aid virtual banks and insurers by providing them with a better understanding of overall market perception, and thereby enable them to adjust their practices and business models accordingly. We also hope that the Study will provide insights and perspectives to assist regulators and the government to build a strong foundation for the fintech and insurtech industries in Hong Kong. * The Project is funded by the RGC Theme-based Research Project Grant, Project No. T31-604/18-N Prof. Kar Yan Tam School of Business and Management, The Hong Kong University of Science and Technology