Opening a virtual bank account in Hong Kong that suits your needs.

What is a virtual bank?

Let's start with some basic information. A virtual bank is a bank that operates entirely online, without the need for physical cards or branches.

According to Baidu's definition:

"A virtual bank refers to a bank that primarily provides retail banking services through the internet or other forms of electronic transmission channels, rather than physical branches. Customers can open accounts and use banking services through financial technology (fintech) and mobile applications. Virtual banks do not have offline branches. However, they comply with the same set of regulatory rules applicable to traditional banks."

The logos below represent virtual banks in Hong Kong. Do you recognize any of them?

To open an account with these virtual banks, all you need to do is download their app and connect to a Wi-Fi network in Hong Kong.

Why do virtual banks exist?

For traditional banks in Hong Kong, accounts with deposits of less than HKD 10,000 are generally not profitable. In fact, they may even incur management fees. Why is that? If an account is not used for a long period of time or has no deposits, the bank is required to submit reports to the Hong Kong Monetary Authority every year, which adds additional costs. As a result, inactive accounts in Hong Kong's traditional banks are often frozen. This is one of the reasons why traditional banks like Standard Chartered, HSBC, and Bank of China have been raising the account opening requirements for non-Hong Kong residents. Virtual banks, on the other hand, do not have physical branches or these associated costs. Therefore, they usually do not have minimum deposit or account opening requirements for users.

Additionally, as Hong Kong is an international financial center, banks have strict anti-money laundering requirements. When opening an account with traditional banks using a mainland Chinese ID card, the bank needs to conduct anti-money laundering (AML) and know-your-customer (KYC) checks, which can prolong the account opening process. This is also why there are often long queues at Hong Kong banks.

Which virtual banks are there in Hong Kong?

Here are some of the main ones:

1. ZA Bank

ZA Bank was the first virtual bank to obtain a virtual banking license from the Hong Kong Monetary Authority in 2019. It was also the first virtual bank to launch in Hong Kong. To open an account with ZA Bank, you just need to be in Hong Kong, connect to the internet, and download their app. ZA Bank is a joint venture between ZhongAn Insurance and Bank of Communications. ZhongAn Insurance is a subsidiary of Tencent, so indirectly, ZA Bank is also under Tencent. ZA Bank has also partnered with HashKey, the first licensed cryptocurrency exchange in Hong Kong, to provide fiat currency services. ZA Bank is also a member of the Hong Kong Deposit Protection Scheme, offering up to HKD 500,000 in compensation for each account.

2. Ant Bank

Ant Bank is a virtual bank under Ant Group, a subsidiary of Alibaba Group. Similar to ZA Bank, Ant Bank allows both Hong Kong residents and mainland Chinese visitors to open accounts online. It is also a member of the Hong Kong Deposit Protection Scheme, offering up to HKD 500,000 in compensation for each account.

3. Airstar Bank

Airstar Bank is backed by Xiaomi. It also participates in the Hong Kong Deposit Protection Scheme, offering up to HKD 500,000 in compensation for each account.

4. LIVI BANK

LIVI BANK is mainly owned by Bank of China (Hong Kong), JD.com (Hong Kong), and Jardine Matheson Group. In addition to serving Hong Kong residents and mainland Chinese visitors, it also provides account opening services for Hong Kong companies registered by mainland Chinese residents. LIVI BANK is also a member of the Hong Kong Deposit Protection Scheme, offering up to HKD 500,000 in compensation for each account.

The above-mentioned four banks allow both Hong Kong residents and mainland Chinese visitors to open accounts remotely in Hong Kong. There are also several banks that only support account opening for Hong Kong residents, such as PAOB (owned by Ping An), Fusion Bank (strategically invested by Tencent), and Mox Bank (owned by Li Ka-shing).

Now, let's move on to the next question.

Is a virtual bank suitable for you?

Evaluate the following three points:

Do you need services such as mortgages or investments?
Do you frequently use cash, checks, or bank drafts for deposits?
Do you usually prefer to visit a bank in person for services?

If you answer "yes" to any of the above questions, you should carefully consider whether a virtual bank can meet your needs.

As you can see, virtual banks only provide basic services such as deposits, transfers, and payments. Many extended financial services are not available. Even deposits and withdrawals may have daily transaction limits.

What should you pay attention to when opening a virtual bank account?

Deposit rates may differ from those of physical banks. Virtual banks usually offer Hong Kong dollar current accounts, but only a few also offer Renminbi and US dollar current accounts. Pay attention to the conditions for higher deposit rates, as they may only apply to new customers who successfully open an account within a specified period and deposit a specified amount. After the specified period, the deposit rates may significantly decrease. Most virtual banks offer different deposit rates based on the deposit amount. Dividend payment frequencies also vary, with some banks offering daily dividends and others offering monthly dividends.
Transfer limits: If you set up automatic transfers from your virtual bank account to a linked bank account, there are daily deposit limits ranging from HKD 30,000 to HKD 500,000. Similarly, if you transfer funds out of your account, there are daily transfer limits, which vary depending on factors such as whether the account has completed internal verification by the virtual bank, the transfer method, and whether the recipient's account is a registered account or an account with the same name. The transfer limits range from HKD 200,000 to HKD 1,000,000.
Cash withdrawal methods: Some virtual banks provide physical debit card/credit card withdrawal services with daily withdrawal limits ranging from HKD 20,000 to HKD 50,000. However, there may be withdrawal fees, such as HKD 20-30 for withdrawals from Mastercard ATMs and additional exchange rate fees for foreign currency withdrawals from Visa ATMs. Some banks also offer cardless withdrawal services at designated ATMs without additional charges.
Cashback rewards: Most of these banks offer debit cards without annual fees, but foreign currency transactions may incur fees. When using these cards, consumers can usually enjoy cashback rewards, with different banks offering cashback percentages ranging from 1% to 8% depending on the category of expenditure. Some banks determine the cashback percentage through lucky draws. The cashback limits vary, with some banks offering as low as HKD 250 per month and others offering up to HKD 10,000 per transaction. Here's a comparison of the services offered by these banks:

How to terminate a virtual bank account?

It's not as simple as just uninstalling the app. Account holders should first transfer the funds in their account to another bank account, then download electronic statements or notifications as records, and finally inform the virtual bank's customer service to arrange for account termination.

So, if you have any needs related to investing in US stocks or paying insurance premiums in Hong Kong, opening an electronic account in Hong Kong can be a good option.