Virtual banks, with innovative financial technology (fintech) and enhanced user experience as their selling points, have steadily commenced operation. Many offer high deposit interest rates and spending rebates as promotional offers, proving considerably attractive for mobile banking-savvy consumers. Compared with traditional banks, the 8 virtual banks in Hong Kong are still at early stages of operation and mainly provide basic banking services, such as deposits, time deposits, cash withdrawals, local transfers, etc., but their long-term development should not be undermined. A number of virtual banks has advertised innovative banking products that will be readily rolled out to offer a more convenient and diverse experience for customers. Faced with a barrage of advertisements, consumers should not base their decisions purely on rewards and welcome offers. Instead, they should fully consider their personal banking practices and habits, needs for cash deposits and withdrawals, requirements for various banking services such as transfers, remittance, foreign currency time deposits and trading, then scrutinise the requirements and terms and conditions of the rewards and welcome offers, before deciding whether to open a virtual bank account and selecting a bank that truly meets their needs. The Consumer Council surveyed the services of 8 virtual banks and summarised 10 key tips for those who are interested in setting up a virtual bank account.
1. Remote Account Opening: Pay Heed to Eligibility
Without physical branches, virtual banks mainly rely on fintech to allow customers to open accounts and use the banking services through a mobile app, saving the time required to complete the process in person at banks. Account applicants must be aged 18 or above and hold a valid Hong Kong Identity Card, and are generally required to have a valid residential address and phone number in Hong Kong. Currently most virtual banks stated that they could not set up an account for US Citizens and individuals with taxpayer identity in the USA or jurisdictions outside of Hong Kong. Certain banks even stated that the applicant must physically be in Hong Kong. If the conditions are not met, they may encounter issues in either opening or managing the account afterwards.
2. Round-the-clock Operation: Set Hours for Some Services, Consider Against Personal Needs
Thanks to artificial intelligence or a digital work process, virtual banks can operate 24/7 around the clock to remotely open accounts for customers, verify account applicants’ identity, as well as providing other basic banking services, such as savings deposits, time deposits, cash withdrawal, local transfers, etc. Some virtual banks also provided debit cards, credit cards, foreign currency trading and loans, but all 8 banks currently did not offer cheques, mortgages and investment services. Depositors should take note that despite certain banks providing foreign currency trading or loans, such services could only be provided during designated hours. The Council recommends consumers interested in setting up a virtual bank account to consider whether their selected bank could provide services that meet their personal needs.
3. Account Management Through Mobile App: Beware of Identity Verification and Security System Updates
Virtual bank accounts are managed by mobile phones. In the unfortunate event that the bank account owner’s phone has technical issues or is lost, they would be unable to operate the account and could only resume banking services after they repair or purchase a new mobile phone, or by using another phone. Furthermore, as virtual banks have relatively stringent settings for identity verification and system stability, customers should have a decent understanding of smart phone operations and safety awareness. The verification methods provided by the 8 virtual banks include passwords, facial recognition and fingerprint recognition. Besides learning about the various verification methods, account owners should also safeguard their phone, ensure the operating and security systems of the phone and the relevant banking app are regularly updated.
4. Cash Withdrawal: Some Require Transfer to Other Banks for Withdrawal
Despite the increased prevalence of electronic payment systems in Hong Kong, individuals with the habit of using cash should first enquire about cash withdrawal arrangements before opening a virtual bank account. 5 of the surveyed banks provided cash withdrawal services, 3 of which provided a physical debit card or credit card which could be used for withdrawing cash from designated ATM networks (JETCO, Mastercard or Visa), while 2 provided card-less cash withdrawal. The 3 remaining banks did not provide direct cash withdrawal services currently. Should account holders need to withdraw cash from their virtual bank account, they would need to transfer funds to other bank accounts, then withdraw the money from the destination bank, making the process more complicated.
5. Deposits: Take Note of Daily Deposit Limits
All virtual banks accepted real time deposits or transfers using the Faster Payment System (FPS). They also accepted deposits via Real Time Gross Settlement System (RTGS), an interbank payment settlement platform. FPS deposits are generally free of charge and without an upper limit. Moreover, specific deposit/transfer options were provided by some banks, such as Electronic Direct Debit Authorisation (eDDA) and “Quick Save”. Deposits made using these functions were free of charge, but had a daily deposit limit ranging from HK$30,000/day to HK$500,000/RMB¥500,000 per bank.
6. Transfer Service: Maximum Limits Vary
Similar to traditional banks, virtual banks had daily transfer or cash withdrawal limits. The daily cash withdrawal limit ranged from HK$10,000 to HK$50,000, while the transfer limit ranged from HK$10,000 to HK$1 million depending on the situation. As such, individuals should first enquire about the relevant limits before opening a bank account. In case the account holder needs to withdraw or transfer a high value of funds due to an emergency, they should reserve sufficient time for the arrangement.
7. Time Deposits: Types of Foreign Currency, Annual Interest Rates and Early Withdrawal Charges Vary
Currently only 4 virtual banks offered time deposits in Hong Kong Dollars, amongst which 3 also provided time deposits in Renmenbi and US Dollars, with much variation in the types of foreign currency time deposit plans. For example, the time deposit annual interest rates for some banks were based on the deposit amount, or number of partakers, the more partakers the higher the annual interest rate. The relevant banks also had different requirements for early withdrawal of time deposits. While 3 banks did not have or currently waived such charges, some banks would charge a minimum fee of $200 and the deposit withdrawn early may be charged an interest based on the savings deposit interest rate or even not given any interest.
8. Remittance Service: Telegraphic Transfer to Overseas Not Yet Available
At present, only 1 virtual bank accepted telegraphic transfers from overseas banks into their virtual bank accounts, but this bank currently did not provide telegraphic transfer service to overseas bank accounts. The other 7 virtual banks did not provide remittance service to or from overseas. Therefore, individuals who require telegraphic transfer should enquire about the launch schedule of such services before making a decision.
9. Digital Wallet/Payment App Binding: Some Debit Cards May Charge Handling Fees for Foreign Currency Transactions
Currently apart from 2 virtual banks, the other 6 all allowed binding of digital wallet/payment apps to the bank accounts, making it easier for spending, while some even offered spending rebates. However, consumers should be mindful that only eligible spending would receive a rebate and the definition of eligible spending is defined by the virtual bank and may be subject to change. 4 virtual banks provided physical or virtual debit cards, of which all physical cards did not display the expiration date and Card Verification Value (CVV) number, which could lower the chance of misappropriation in case the card is lost or stolen. Generally, an annual fee is not required for debit cards, but a handling charge ranging from 1.8% to 1.95% of the transaction amount may be charged for foreign currency transactions.
10. Promotional Offers: Pay Heed to the Limit and Validity Period
To attract new depositors and capital, many virtual banks have launched various promotions such as higher savings or time deposit offers and spending rebates, yet such offers come with conditions such as limits and validity periods. For instance, a bank provided a HKD savings deposit annual interest rate of up to 3.6%, but the offer was only applicable to the initial HKD$20,000 within the first 3 months after a new customer had successfully opened an account within the designated period. The interest rate after 3 months would be subject to the bank’s announcement and currently the relevant interest rate is 1.2%. Many virtual banks have also launched spending rebates but usually this type of offer is a “limited time” offer and the terms and conditions, such as the rebate percentage and designated traders, might change. The Council reminds consumers interested in setting up a virtual bank account not to be lured by interest rates and to avoid over-consumption while attempting to earn rebates.
The Council reminds consumers that Hong Kong’s virtual banks are utilising fintech to progressively expand various banking services, such as launching numberless debit cards to enhance security, time deposit maturity dates designated by customers, etc. All of these will further increase market competition for the banking services. Consumers interested in opening a virtual bank account should pay heed to the latest development and service scope of the various virtual banks, then carefully consider personal requirements for banking services before making a decision.
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