Unleashing the power of virtual banks in APAC | a series

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The creation and growth of virtual banks are redefining the banking ecosystem. These banks are disrupting the fundamental idea conceived of a traditional bank.  

APAC’s virtual banking landscape

Twimbit defines a virtual bank as one that primarily operates without physical branches through the internet using electronic delivery channels (smartphones, tablets, laptops, etc.). Delivering retail banking services such as account opening, deposits, loans, fund transfer, and investments online only using digital channels.    

Moreover, these are not digital branches of incumbent banks, and not necessarily established by them. Non-banking service providers such as telecom, technology, and fintech companies are eager to establish such banks.   

‘Virtual’ bank is the most used term in various geographies.  It is also known as a ‘digital-only’ or ‘digital’ or ‘challenger’ or ‘neo’ bank. Twimbit chooses to use a “virtual” bank as the term for this report.  

Virtual over traditional banks: Key characteristics and difference 

Fundamentally, virtual banks differ from traditional ones in their operations through the digital-only value proposition. It primarily targets internet-savvy millennials due to their constant use of the internet and vast exposure to fast-moving technologies.  To realize the full potential, thesebanks are harnessing technological innovations and developing agile, lean business models, building products on disruptive technologies (e.g., AI-assisted chat-bots, cloud platforms). Thereby changing the way individuals and companies can access, use, and benefit from banking services.  

The biggest opportunity for them is to leverage their omnipresence, ease of access and low-cost services (the result of reduced overhead costs) to serve the unbanked population of the region. As statistics indicate, over 2 billion population of the APAC region have no access to banking services.  Small-medium enterprises is another large segment that is attracting the attention of these banks.  

Figure 1:Virtual banks exhibit new age characteristics
Figure 2: Virtual banks are changing the traditional ways of operation

*Preliminary license: In certain APAC regions, the regulatory authorities issue a preliminary license to begin operations as a virtual bank. Later they grant a final approval or license post assessing the viability of the bank after a specific cadence.   

Why are they becoming successful?

The mere pedigree of such banks (e.g., technology giant: Grab and telecom major: Xiaomi)
are the cornerstone for its success. The companies are powerhouses of customer data, which is
harnessed to form insights on:

These data-backed insights are utilized to create intuitive and innovative bank offerings with
negligible cost attached to it, when compared to incumbent banks.

The emergence of virtual banks 

The growing popularity not only lies with incumbents branching-out with digital-only presence; it has led to non-banking services providers building them (e.g., Alibaba’s MyBank and Xiaomi – AMTD group’s Airstar Bank).    

The emergence of these banks has given an opportunity to various technology, telecom, fintech giants to address a market opportunity once considered a no-entry for non-banking players.  Further, many consortia are attracting venture capital (VC) funding from global VC firms, such as Tiger Global, Sequoia Capital, Ribbit Capital, Social Capital, etc.  

By July 2019, virtual banks had globally raised US$2.5 billion from 55 deals as stated by Business

There is increasing pressure on existing banks to ramp up and take a more digital-focused approach to compete. They are also looking at seizing this opportunity to enter new markets as pure-play virtual banks. Some of them are also launching their version of digital banks under entirely new brands. Communicating the energy and excitement of a start-up and leveraging decades of experience as a trustworthy financial services company.  

These trends validate the huge potential these digital-only propositions hold in achieving the paradigm shift in digital-only banking among the unbanked and underserved population.  

A majority of consortia formed to build them are usually a collaboration between technology, telecommunication, and traditional banks. The consortia aim to leverage the technical know-how of a technology giant, the wide network reach of a telecom giant, and the credibility and regulatory expertise of a traditional bank.  This can transform the delivery of products and services to the population through digital-only channels.  

An example to further highlight this proposition is the alliance between Grab (a transportation hailing app) and Singtel, to leverage their current reach of customer data and network to bid for a license.

However, the full operability and scalability of these banks have been delayed due to the slow-paced movement in the region’s regulatory environment.  In various APAC countries, such as Hongkong, South Korea, and Australia full virtual banking license is granted. Whereas there are other countries, who are either evaluating or partially granting the license to operate as virtual banks. In cases, where full operating license is not granted, they hold alternative licenses (e.g., Australia’s partial ADI) or work with licensed partners to offer their services (e.g., India, Indonesia).

Debunking APAC’s virtual banking market presence and regulatory landscape

Australia’s virtual banking market

South Korea’s virtual banking market

Taiwan and Japan’s virtual banking market

Hongkong’s virtual banking market

China’s virtual banking market

India’s virtual banking market

Singapore’s virtual banking market

Indonesia and Malaysia’s virtual banking market

Philippines, Thailand, and Vietnam’s virtual banking market


With APAC continuously increasing its footprints in this environment, it can soon become a leading region with every economy formally promoting financial inclusion and innovation. Virtual banks have the ability to harness the power of data using the right set of technology, catering to the unmet financial needs of mass customers. While we already have 23 licensed banks, the region has the potential to grow up to 50 in the span of the next 3 years.

The global health crisis of ‘Covid-19’ has further strengthened the need to conduct financial transactions virtually with ease of accessibility to loans, fast approval turnarounds, and the mere availability of financial products. In addition to that, the limitation to access the branches, ATMs, and VTMs has resulted in an insurmountable need for digital-only banking.

Despite the growing popularity and demand, there are enormous volumes of customer data shared on various platforms which in-turn is analyzed to create credit assessment platforms, posing a risk to data security and personal invasion. Most banks have taken measures to be transparent about data sharing and protection policies. However, it still restricts customers to fully adopt digital-only services.

Virtual banks are here to make incumbents face fierce competition in product offerings, mass customer acquisition targets, innovative customer journeys, and efficient processes. These banks are focused on ensuring the unbanked – banked, underserved- served, and millennials take financially sound decisions.


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