Digital vs Traditional Banks: Hong Kong Business Accounts

At a glance

Each bank sets its own service range, fees, account-opening requirements and approval decisions; the table above is a general comparison.

First, something a lot of articles still get wrong

The term “virtual bank” is out of date.

In October 2024 the HKMA formally renamed them “licensed digital banks”. The reason is practical — “virtual” reads as “fictional” or “not safe”, when in fact these banks are licensed and fully regulated by the HKMA, exactly like any other.

Hong Kong currently has 8 licensed digital banks. Deposits are covered by the Deposit Protection Scheme in the same way.

So if you are still worried about whether a “virtual bank” is safe — the premise of the worry does not hold.

Which companies suit a digital bank?

Broadly:

• Mostly local receipts and payments, with modest cross-border amounts
• Many transactions but small individual amounts (an online shop, a subscription service)
• No need for letters of credit or trade finance
• Few directors and a simple structure
• Wanting to open quickly and start using it

A small service company, a local retailer, or a business collecting through e-commerce payment platforms will generally find a digital bank sufficient and convenient.

Where traditional banks remain irreplaceable

1. Trade finance and letters of credit. For import and export, this essentially requires a traditional bank.

2. Large cross-border flows. With large amounts and counterparties spread across regions, a traditional bank’s network and processing capability are stronger.

3. Lending and credit. For a working capital loan or an overdraft facility, the product range is far wider.

4. Multi-currency needs. Holding and converting several currencies is generally better served.

5. What the other side requires. Some overseas or large corporate customers specify the type of bank they will deal through.

Which means: if you are in cross-border e-commerce or import and export, a traditional bank is still on the list.

How does the difficulty of opening differ?

Digital banks — the process is generally completed online and takes less time, and they are relatively friendly to smaller companies. But that does not mean approval is certain — they still have to understand your business and your money flows.

Traditional banks — usually a director in person at a branch, a deeper review, and a longer timeline.

Worth noting: both look at your proof of business. So whichever you choose, the preparation still has to be done — what differs is the length of the process, not whether preparation is needed.

How should you compare fees?

This depends on how you actually use the account. Do not look only at whether there is a monthly fee.

What usually drives the cost:

• Monthly fee or minimum balance requirement
• Local transfer charges
• Cross-border remittance charges and intermediary bank fees
• The spread on currency conversion — frequently larger than the published charges
• Handling fees on payment-platform settlements

A bank with no monthly fee but a wide conversion spread can be more expensive, for a company converting often, than one that charges a monthly fee.

The practical method: run last year’s actual transaction volumes and currency mix through each, rather than comparing fee schedules.

Why do so many companies end up with both?

Because their strengths do not overlap.

The common combination is:

• A digital bank for day-to-day collections, payroll and small payments — fast, convenient, transparently priced
• A traditional bank for large cross-border flows, trade finance, lending, and anywhere a formal banking relationship has to be evidenced

And a second account has one practical benefit: one account having a problem does not stop the whole company. Accounts being suspended or asked to close is uncommon, but it is a serious problem when it happens.

The cost is one more set of records to reconcile. Though if you use accounting software, the extra work of one more account is fairly limited.

How to decide: three questions

1. Do you need trade finance or letters of credit? Yes → a traditional bank is required.

2. How complex are your cross-border amounts and regions? Complex → lean traditional.

3. Is speed and convenience what you most need? Yes, and the business is simple → start with a digital bank.

The most common path for a new company: open with a digital bank and start operating, then apply to a traditional bank once the business is stable and there is a transaction history. By then you have a real record, which makes the traditional bank’s questions much easier to answer.

We handle incorporation and company secretary work, and organise the account-opening material around your actual business model — the approval decision belongs to the bank.

Talk to us, or get started.

This article is general information and does not constitute banking or financial advice. Licence categories, service ranges, fees and account-opening requirements are as published by each bank and by the Hong Kong Monetary Authority.