Hong Kong’s eight virtual banks have reported a combined loss of HK$1.28 billion (approximately US$160 million), as they struggle to achieve profitability.

While one bank claims to have achieved monthly net profit, two are expected to break even in the next year.

The sector faces challenges related to low transaction volumes and high customer acquisition costs in an oversaturated market.

These virtual banks were established following a 2017 initiative by the Hong Kong Monetary Authority (HKMA) to foster digital banking services.

However, despite backing from influential firms like Ant Group, Tencent, and Standard Chartered, the banks managed to attract only 8.8% of retail banking depositors.

This yields a mere 0.3% market share in total loans and assets as of 2023.

The HKMA’s review from August highlighted that these banks have not effectively capitalized on their increasing depositor base.

ZA Bank, which commenced operations in 2020 and holds the largest share of total assets among the virtual banks, recorded a loss of HK$109.3 million in the first half of the year. Despite this, it achieved net profit in July.

CEO Calvin Ng credited this turnaround to the bank’s adaptable product offerings, which have been tailored to depositor needs amid rising interest rates.

Meanwhile, WeLab Bank, supported by substantial corporate investment, anticipates reaching breakeven by 2025.

It has expanded its loan book by 160% in the first half but still reports a loss of HK$124.4 million.

Mox, backed by Standard Chartered, reported the steepest loss among its peers, totaling HK$433.2 million.