The wave of virtual banks, AKA digital banks, that started in Europe and US have now arrived in Asia. Some are what are known as “challenger banks,” which usually obtain their own banking license; the others are referred to as “neobanks,” which utilize their partners’ banking licenses. Either way, all virtual banks have a three characteristics in common: they do not have physical branches, they are mobile-first, and they aspire to provide better UI/UX and more innovative financial services.

In Europe, known entities like Revolut, Monzo, N26, and Starling Banks have accrued millions of users and newly minted members of the unicorn club. In the US, Chime, Varo, Current, Sofi, Simple, and Dave are all the rage.

As part one of a two-part series, we will focus on virtual banks in the Asia Pacific region (with the exception of Japan, Korea, and Australia). Part two of this series will focus on Japan’s unique banking structure and development, so be sure to stay tuned.

Mainland China

China didn’t allow for the establishment of non-state owned banks until 2014, when it issued banking licenses to five private companies for the first time. It later issued another twelves licenses in 2016 and two more in 2019. Currently, there are 19 non-state owned banks in China, including a number that don’t have physical branches and are thus categorized as virtual banks.

In 2020, these 19 non-state owned banks have accumulated a total asset of CN ¥1.25 trillion (USD $193 billion), where the top two players, WeBank and MYbank, occupy 52 percent of market share.

1. WeBank (微眾銀行): Backed by Tencent, Baiyeyuan, and Liye Group, WeBank started its operation in Jan 2015. It has USD $53 billion of total assets, 2 million personal accounts, and 900,000 business accounts.
2. MYbank (網商銀行): Backed by Ant Group, Wanxiang, and others, MYbank started its operations in Jun 2015. Mostly focused on SME and micro business, it has USD $48 billion of total assets and 208.7 million business accounts.Mainland China
   China didn’t allow for the establishment of non-state owned banks until 2014, when it issued banking licenses to five private companies for the first time. It later issued another twelves licenses in 2016 and two more in 2019. Currently, there are 19 non-state owned banks in China, including a number that don’t have physical branches and are thus categorized as virtual banks.
   In 2020, these 19 non-state owned banks have accumulated a total asset of CN ¥1.25 trillion (USD $193 billion), where the top two players, WeBank and MYbank, occupy 52 percent of market share.
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Hong Kong

Hong Kong regulators started working on a standalone virtual bank license in 2018 and handed out eight licenses across three tranches in the first half of 2019. No virtual bank license has been issued since then, and now there are 160 banks in total in Hong Kong.

1. ZA Bank (ZhongAn Bank, 眾安銀行): Launched in March 2020, ZA Bank was the first virtual bank to open in Hong Kong. Backed by HKEX listed insurtech company ZhongAn, which was established by Alibaba, Tencent, and insurance giant PingAn. ZA Bank provides personal accounts, business accounts, payment cards, and insurance.
2. Airstar Bank (天星銀行): Airstar is the second virtual bank to commence operation in Hong Kong. It is backed by Xiaomi and AMTD Group (which also applied for a virtual bank license in Singapore) and provides personal accounts only.
3. Fusion Bank (富融銀行): Fusion is the first virtual bank to roll out FX service in Hong Kong. Backed by the Industrial and Commercial Bank of China, Hong Kong Exchanges and Clearing Limited, Tencent, and Hillhouse Capital, Fusion partners with WeChat Pay. It currently only provides personal accounts.
4. WeLab Bank (匯立銀行): WeLab Bank is a subsidiary of WeLab, which started as an online consumer lending company. It provides personal accounts and payment cards.
5. Ant Bank (螞蟻銀行): Backed by Ant Group (which is known for its payment app Alipay and its recent failed IPO), Ant Bank only provides personal accounts for now.
6. Livi Bank: Livi is the fourth bank to open in Hong Kong. The bank is co-owned by JD, Bank of China, and Jardine Matheson Group. It provides personal accounts and payment cards with cashback.
7. Mox Bank (SC Digital): Backed by Standard Chartered, telecom giant PCCW, and online travel agent Ctrip, Mox provides personal accounts and payment cards with cashback.
8. PingAn Oneconnect Bank (平安壹賬通): Backed by PingAn, the insurance giant in China, and OneConnect, a NYSE listed SaaS provider for small and medium banks, PingAn OneConnect Bank provides personal accounts and business accounts.

Taiwan

Taiwan regulators issued three virtual bank licenses in July 2019, and no new license has been issued since then. There are currently 40 local banks in Taiwan.

1. Rakuten International Commercial Bank (樂天國際商業銀行): Rakuten Bank, started in Dec 2020, is the first virtual bank to open in Taiwan. Backed by IBF Financial and Rakuten, which is the largest EC platform in Japan, it provides personal accounts only.
2. LINE Bank (連線銀行): LINE Bank is the second to open in Taiwan, backed by messenger app giant LINE and Fubon Bank. It provides personal accounts only.
3. NEXT Bank (將來銀行): Although NEXT Bank has acquired the proper license, it has not launch its service yet. It is backed by telecommunications giant Chunghwa Telecom, Mega Bank, and supermarket chain PX Mart.

Singapore

In Dec 2020, Singapore regulator MAS issued digital banking licenses to four companies for the first time. Two of them are Digital Full Bank licenses, issued to a consortium comprising Grab and Singtel, and an entity wholly-owned by Sea Ltd. The other two of them are Digital Wholesale Bank licenses, issued to a consortium comprising Greenland Financial, Linklogis Hong Kong Ltd, and Beijing Co-operative Equity Investment Fund Management, and an entity wholly-owned by Ant Group.

The four successful applicants that beat 10 other contenders were Razer (with FWD, Insignia Ventures, Carro), Osim (with EZ-Link, Temasek, Far East), AMTD (with Funding Societies, Xiaomi), and Bytedance. No other license has been issued since then.

None of the license holders have launched their virtual banking services at the time of this publication.

Malaysia

Malaysia regulator is currently accepting applications for its first digital bank licenses. They have received 29 applications, including Grab (with Singtel), iFAST, Malaysian conglomerate Sunway (with Linklogis and Bangkok Bank), AirAsia, AEON Financial Service, and more.

Philippines

Philippines allows holders of rural banking licenses to convert their license into digital banking ones. Overseas Filipino (OF) Bank was the first one to do so in April 2020, and Singapore-based Tonik was the first digital-only bank to complete such conversion in 2021.

A while later, Singapore-based UNObank became the first digital bank in the Philippines to acquire a digital banking license directly without conversion.

Vietnam

The Vietnam regulator has not yet issued any official virtual bank licenses. However, there are a few that are a few online-only banks and digital banks currently standing or in the works.

1. Timo-Plus: Timo is the first online-only bank in Vietnam, which initially partnered with VP Bank, but switched to Viet Capital Bank in 2020. Started in 2016 and relaunched in Sep 2020, it has more than 100,000 accounts.
2. Cake: Vietnamese ride-hailing company Be Group has partnered with local lender VPBank to introduce Cake, a new digital bank in Jan 2021.
3. GIB Global: GIB Global Investment Digital Bank, headquartered in Hong Kong, is partnering with a Vietnamese telecom firm Vimo and local payments provider Gpay to bid for a digital banking licence in Vietnam.

Thailand

Thailand’s central bank is currently studying different options of virtual bank licenses. Unlike other Southeast Asian countries, Thailand has a rather mature banking environment, where 80 percent of Thai adults already have at least one bank account.

1. Line BK: Line, the messaging app giant that also has a virtual bank in Taiwan, has partnered with Kasikorn Bank to launch a neobank service Line BK in Oct 2020 and has already accumulated two million personal accounts.

Indonesia

There is no specific license for digital banks in the country as of yet. Yet, there are some neobanks in Indonesia.

Line launched a digital bank in June 2021, partnering with Hana Bank Indonesia. It competes against several giants, such as Gojek with Bank Jago, Sea Group with Seabank Indonesia, Akulaku with Bank Neo Commerce, and Kredivo.

India

India regulator has not yet handed out any digital banking licenses. Yet, there are some neobanks in the field, such as Paytm Payment Bank, Niyo, Open Bank, BharatPe, InstantPay, and RazorPayX.

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