Few industry sectors have been as comprehensively affected by the digital revolution as the finance industry. Fintech is the technology-enabled innovation in financial services that can usher in new business models, applications, processes, and products with a material effect on the provision of financial services. The finance sector has made tremendous efforts to make things digital. The fintech element has been gaining momentum both in breadth and depth over the years, which has contributed significantly to the successful transformation and sustainability of Hong Kong’s financial services industry.
Fintech has been the key catalyst of change in the finance sector, from automated trading to robots taking over repetitive back-office functions, and customer interactions taking place through chatbots. Technology-fueled solutions have enabled financial transactions to flow more smoothly and quickly than what people imagined several years ago. Nowadays, quick and secure instant money transfers between banks and customers through virtual smartphone applications are commonly seen. Singapore bank DBS set itself a simple yet powerful challenge: Act more like a technology startup, and less like a bank. This culminated in a clear vision to “make banking joyful”, with a focus on making banking effortless and user-friendly.
When employing new technologies, financial institutions need to determine acceptable levels of risk, meet regulatory and compliance requirements, and develop a framework of risk management. To address the increasing market needs for more efficient retail payment services, the Hong Kong Monetary Authority launched the Faster Payment System (FPS) on Sept 17, 2018. Innovations like FPS, along with e-wallets, virtual banks, and digital insurers, are showing the industry and their customers what is possible, and what banking is capable of serving them by creating easier-to-use and accessible platforms. All banks and e-wallet operators in Hong Kong can participate in FPS, which enables their customers to make cross-bank/e-wallet payments easily, by entering the mobile phone number or the email address of the recipients, with funds available to the recipients almost immediately. FPS operates round-the-clock and supports payments in Hong Kong dollars and renminbi. Use of fintech will open opportunities for small lenders that lack branch networks. For example, China Citic Bank International, a Hong Kong-based midtier lender, aims to cut paper usage in its 24 branches and save 1 million pieces of paper next year.
Open Application Programming Interface (API) is a construct that exists to share data when coding software platforms and in interface for a safe and secure means of sharing data. With Open APIs, there is the potential for banks to co-create solutions and drive technological development with industry partners and, in the process, create a better and broader offering for customers. To help continue to build Open API adoption momentum, recently the Hong Kong Science and Technology Parks Corp (HKSTP) and HSBC formed a partnership to drive smart, API-led banking innovation in Hong Kong.
To conclude, Hong Kong is in a unique position to capitalize on global trends and the economic development of the mainland. Hong Kong’s commitment to developing its fintech industry and ecosystem, coupled with its strong collaboration efforts with the Middle East, make it an ideal partner for the region
As Hong Kong opens the door to new virtual banks, robo wealth advisers and digital payment players, banks are facing new competitive dynamics in areas previously considered as the traditional banking market. The development of open banking provides an opportunity for banks to launch a holistic range of additional products and services. As the banking industry progressively recognizes the importance of conducting a tech overhaul, including embracing the use of third-party tech, connections between banks and fintech enterprises become increasingly important. Organizations like HKSTP are crucial in acting as intermediaries.
A fintech company has a crucial part to play as banks strive for higher levels of technology. For example, PaySmart Capital Ltd developed its Liquid Corporate Digital Verifiable Credentials (CDVCs) to provide the highest level of digital information security. CDVCs are digital credentials issued by a business organization that can be used to verify the legitimacy of a business transaction, records, identity, and authentication of an individual. The process significantly improves the efficiency of business loan applications and annual credit reviews, and optimizes the account-opening process. Companies can freely exchange data that has been verified at the Source of Truth, while banks can gain access to their customers’ most up-to-date financial information from a variety of sources with single consent verification.
As fintech brings more opportunities to the finance sector, there is a strong demand for talent. As such, there is an urgent need to build up a talent pool locally and in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), so as to contribute to enhancing Hong Kong’s status as a forerunning international financial hub.
Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said his team is looking at ways to provide subsidies and support the adoption of innovative fintech solutions. A potential way is to match financial institutions with fintech startups. This would enable fintech firms to access Hong Kong’s diverse ecosystem of world-class regulators, business leaders, corporates, and investors to propel their ventures across Hong Kong, the GBA and the wider Asia region where digitization and fintech adoption are growing.
According to a report by EY, the average fintech adoption rate in 2019 across 27 markets was 64 percent. The Chinese mainland was the highest at 87 percent, followed by India (87 percent). Hong Kong stood at 67 percent, showing an improving trend but it still needs to catch up with the front-runners.
To conclude, Hong Kong is in a unique position to capitalize on global trends and the economic development of the mainland. Hong Kong’s commitment to developing its fintech industry and ecosystem, coupled with its strong collaboration efforts with the Middle East, make it an ideal partner for the region. To capture rising opportunities on the horizon, the Hong Kong Special Administrative Region government should consider taking a more proactive role in building the necessary infrastructure to facilitate the development of fintech, such as 6G and the public availability of Wi-Fi. Moreover, there is increasing collaboration between banks and fintech companies, creating a variety of business models based on complementariness.
The author was previously head of financial management (general manager) of Bank of China (HK) Ltd, and director and deputy general manager of Nanyang Commercial Bank Ltd.
The views do not necessarily reflect those of China Daily.
