“We got our virtual banking license in April,” says WeLab CEO Simon Loong. “These are very exciting times. We’re busy building a bank, hiring, recruitment, that’s our core focus. What we’re working on right now is rebuilding the core functions of the bank but with a more innovative and more tech-driven approach. Traditional banks have their own way of doing things, but what we’re looking at is how do we look at offering technology-driven banking through innovation and technology?”

Simon Loong, co-founder and CEO at WeLab, discusses building a virtual bank in Hong Kong and how that will revolutionize banking in favor of the customers in an interview on Bloomberg at the Rise Conference in Hong Kong:

We’re Offering Technology-Driven Virtual Banking 

We got our virtual banking license in April. These are very exciting times. We’re busy building a bank, hiring, recruitment, that’s our core focus. We’re looking at how do we launch a bank within this year and we’re still on track for that. What we’re working on right now is rebuilding the core functions of the bank but with a more innovative and more tech-driven approach. Traditional banks have their own way of doing things, but what we’re looking at is how do we look at offering technology-driven banking through innovation and technology?

We look at three I’s. How do we offer financial services instantly to consumers? The second is intelligence. How do we actually use data to predict what customers need and offer them the right set of products? The third is interactive. How do we interact with our customers? Marketing does not talk to people with a phone anymore, it’s completely through mobile apps.

Virtual Banking Is An Emerging Trend For Hong Kong

Competitiveness in the market is a very interesting thing that we’re seeing. Even now, before the launch, in just the last couple of weeks, four of the major banks in Hong Kong started reducing the minimum account balance in anticipation of the virtual banks launching this year. Existing banks have to change the way they work and we’re seeing that right now. Going forward, what we think will happen is initially people will have a second virtual bank account. They will enjoy it, use it, and it will increasingly become their core bank account. 

For the younger generation who will come on to banking for the very first time in their lives maybe this will be their primary bank account going forward. Our internal projection is that this is going to be the emerging trend for Hong Kong. Virtual banks will offer better choices and more choices for consumers. In the end, consumers will be the beneficiaries of it. We haven’t looked at pricing yet but what we’re looking at is how an innovative customer experience allows us to attract customers. We look at the younger millennial tech-savvy set and what they look at is actually a better customer experience rather than an incremental few basis points on their savings. 

Virtual Banks Have a Competitive Advantage

We as bankers have been trying to do (virtual banking) in the past in traditional banks as well. What we always found the difficulty in was the legacy systems, traditional management layers, and layers of (obstacles) that were built over the years. How do we unwind them? Starting afresh definitely has its own benefit. Also, if you look at traditional retail banking, it was built as a branch distribution model. You have branches, telephones, and stuff like that. Then you finally added onto it a layer of core internet and mobile. 

Legal and compliance are an extremely important part of this and virtual banks are subject to the same regulations as a normal bank. But I think virtual banks do have a competitive advantage. Number one is when you start afresh you don’t have layers and layers of manual processes that you’ve built in the past. You start with the latest and most dynamic kind of regulatory regime in mind. The second thing is that virtual banks will initially offer simpler financial products where you have actually fewer compacts and compliance infrastructure to monitor. traditional banks typically have a wide array of products that you need to monitor. That allows virtual banks to be more specific and more nimble.

Adding a multi-only-channel approach becomes increasingly more complex for it to break down. If we start afresh where we only have mobile-only or online-only, that simplifies things and allows you to have a much faster time to market. That is very important in this very competitive world. 

Focused On Building a Fantastic Virtual Bank

What we are going to look at is how do we build a bank with good economics and also provide customer lifetime value? In the past, we looked at products and their profitability. But what we look at right now is a whole relationship and a customer lifetime value by cohort and how they actually become profitable over the years. Bringing a customer on board today may not be profitable because of acquisition costs. Over time, when they become more and more loyal to us, when we have more products and services, and when they become more engaged with us (they will be profitable). It will be a new way of looking at the whole P&L, managing it on a customer lifetime value on a cohort basis.

We are massively hiring. I think this is an exciting time for virtual banks right now. We are looking at very specific talents, for example, in areas like products, technology, and compliance. These are areas that we are hiring for. I think for us we learned as a homegrown fintech champion in Hong Kong our benefit is that we already have an existing team in Hong Kong versus the rest of the virtual banks. We have around 80 to 100 people in Hong Kong today. What we need to do is just fill certain skillset gaps that we don’t have. What we’re looking for specifically is bankers with an open mind and intellectual curiosity who wants to do something different and build a bank that they love.

What we’re focusing on is building the bank now to make it a fantastic virtual bank in Hong Kong launching by the end of this year.