Law and Contemporary Problems
2021, Issue 84, pp. 95-113
Abstract: This Article examines issues affecting virtual banks, specifically those issues related to the financial technology (fintech) disruption and dealing with alternative banking and finance. It covers an expansive interpretation of Hong Kong regulatory law regarding the requirements for the authorization of virtual banks, with an accompanying study and critique of the financial industry’s collection and storage of digital data in relation to privacy, drawing inspiration from international norms. It then discusses those regulations in terms of their effect on digital financial inclusion. Finally, it evaluates some potential challenges facing fintech lenders, virtual banks included, in a regulatory environment that promotes digital financial inclusion while seeking to manage financial consumerism. This Article adds to the literatures of banking, finance, information technology management, and consumer protection law enforcement by analyzing the latest digital financial inclusion developments in Hong Kong, following the Hong Kong Monetary Authority’s (HKMA) issuing of virtual bank licenses in 2019 in an effort to promote financial inclusion and fintech innovation.
This Article focuses on the connection between financial inclusion and digital financial inclusion as it assesses the role of virtual banks in Hong Kong’s financial inclusion agenda because this connection may be key to virtual banks’ success. This Article undertakes the original contribution of examining why Hong Kong’s inflexible capital requirement, unclear demands on digital banking innovation, and outdated laws against technical risks may render its financial inclusion policy less effective.