The eight virtual banks that had just received licenses in Hong Kong are reportedly now in talks with the city's main automated teller machine (ATM) operator. If the talks are successful, the virtual banks could get access to the operators more than 2,000 ATMs spread across the city's districts, giving them an even larger advantage over traditional brick-and-mortar banks.
Hong Kong's Joint Electronic Teller Services (Jetco), the city's largest ATM operator, had reportedly been approached by the virtual banks in their attempt to come up with an agreement to get access to the company's physical ATMs.
Jetco operates roughly 60 percent of Hong Kong's more than 3,300 ATMs. The company is partly owned by 30 major banks, including two of Hong Kong's three currency-issuing institutions, namely the Bank of China Hong Kong and Standard Chartered.
Under the licenses issued by the Hong Kong Monetary Authority (HKMA), the eight virtual banks are not allowed to operate any physical branches. However, a deal with Jetco could allow the banks to circumvent the restriction by getting access to a third-party's services.
Having access to physical ATMs would allow the virtual banks to offer their customers the convenience and access they require, without the need to set up their physical branches or networks. The deal would also drastically improve the virtual banks' accessibility without disrupting Hong Kong's traditional banks.
In theory, the virtual banks could also issue their cards to their customers to allow them to withdraw cash from the ATMs. The virtual banks could also let users withdraw cash from the machines through their accompanying mobile apps, negating the need for physical cards.
Industry experts have pointed out that what the virtual banks are doing is essentially trying to find a "shortcut" that will offer its customers the best of both worlds. Hong Kong residents mostly do still do business using cash and the virtual banks are aware of that fact. To survive in the city, the companies have to find a way to allow their customers to withdraw cash, while at the same time offer them cashless payment options.
According to World Bank data, Hong Kong is currently the second best-served market in the world in terms of ATMs per resident, right behind Singapore. With a population of 7.5 million people, the city boasts a ratio of around 44 ATMs for every 100,000 residents.
Apart from being used to withdraw cash, ATMs in Hong Kong are typically also used for deposits, bills payments, and other functions. Having access to these machines will likely be a make or break deal for the newly licensed virtual banks, which will be facing a myriad of challenges once they begin operations.
