Kicking-off Hong Kong FinTech Week, Financial Secretary, HKSAR Government, Mr Paul Chan Mo-po, said, “Hong Kong has shown remarkable resourcefulness throughout this testing time. We continue to be the region’s leading financial services hub,”

His comments follow the 2020 FM Global Resilience Index ranking Hong Kong as Asia’s most resilient economy and second among Asian economies in the IMD World Digital competitiveness ranking.

COVID-19 has accelerated the financial sector’s evolution, condensing years of digital adoption into a matter of months. It has changed consumer behaviour and how society interacts with financial services. To fully realise the opportunities ahead, the fintech sector must pursue technology and solutions that address the needs of society.

The first day of the Hong Kong Fintech Week sees regulatory announcements from the Secretary for Financial Services and the Treasury, and Hong Kong Monetary Authority, to build a stronger Hong Kong fintech ecosystem with an aim to drive positive impact for society and businesses.

Mr Chan also recognised Hong Kong’s robust fintech ecosystem, strong regulatory regime, geographic location, as well as the variety of schemes to support fintech and attract talent. This foundation has helped Hong Kong continue to be the first choice among those looking to reach new clients, investors and markets in Asia.

HKMA Announces the launch of the Commercial Data Interchange platform

Hong Kong Monetary Authority announced the launch of the Commercial Data Interchange (CDI)—a new market initiative which establishes a consent-based common standard for data owners to share their digital footprint with banks through data providers. Through the CDI, financial institutions and data providers can easily connect their systems to this infrastructure, allowing their customers to authorise their own service providers – such as utilities companies and payment gateways – to provide banks with relevant and authenticated data through this platform. This will help financial institutions better improve services and allow customers, particularly SMEs, to take more control of their digital footprint.

Secretary for Financial Services and the Treasury Supporting Fintech and Financial Institutions

Secretary for Financial Services and the Treasury, HKSAR Government, Mr Christopher Hui Ching-Yu noted during his speech, “More than 85% in Hong Kong are willing to adopt fintech solutions. The [Hong Kong] government will act as a matchmaker to bridge the gap between big financial institutions and fintech solutions being offered”. The Secretary for Financial Services and the Treasury (SFST) also added that the government is also planning two initiatives, currently under consultation, to connect financial institutions and fintech solutions and build Hong Kong’s strength as an international financial center:

A sponsorship scheme to support financial institutions to co-develop proof of concept projects with fintech companies. The government will provide a matching grant for fintech companies to have their technology and solutions adopted by financial institutions in Hong Kong.

A regulatory regime in place for virtual asset service providers to enhance Hong Kong’s positioning as an international financial center and attract new money

Central banks and Rise of Digitalisation in the Financial Industry

With the rise of big tech companies and digitisation in the financial industry as well as new digital products and services such as QR codes and digital payment, virtual banks and fintech companies have been able to lower the cost of delivery and improve the efficiency of the traditional banking system.

At the same time, it is also enabling financial inclusion for those even in the most remote areas. Governor of People’s Bank of China, Mr Yi Gang, General Manager of Bank for International Settlements, Mr Agustín Carstens and President of De Nederlandsche Bank, Klaas Knot discussed the opportunities and challenges central banks are facing in the digital era.

Mr Yi Gang, said “fintech companies have more capabilities in finding customers and managing risks. The traditional banking system needs to cooperate with fintech companies to adopt the new technology and reduce risk.”

Talking about the recent hot topic on the Central Bank Digital Currency (CBDC), Mr Yi Gang said,

“To further financial inclusion, the People’s Bank of China, has piloted its digital RMB program, eCNY, in a few cities. The PBoC hopes to collaborate with the Bank for International Settlement (BIS) and other central banks in the future to further the development of CBDCs.”

Chief Executive of Hong Kong Monetary Authority, Mr Eddie Yue, added,

“HKMA is collaborating with the Bank of Thailand to explore the potential of a blockchain-based CBDC network, with a view towards more efficient cross-border payments. Looking into the future, further studies will be undertaken to extend the architecture to a multi-CBDC platform, aiming to provide the market with efficient, cost-effective, and transparent cross-border payments services.”

Secretary for Financial Services and the Treasury, HKSAR Government, Mr Christopher Hui Ching-Yu, said,

“Currently what have been talked about are more on the retail level of DCEP (Digital Currency Electronic Payment) application, however, for a currency to fly, it also needs to fulfil the needs of institutions, payment across companies, the investment function beyond payment, and even potentially as a reserve currency. Hong Kong is uniquely placed as the international link of the digital RMB with its traditional legacy as an international financial center with the most suitable resources and expertise.”

Regtech’s Significant Growth in Hong Kong

Deputy Chief Executive, Hong Kong Monetary Authority, Mr Arthur Yuen, JP, announced the launch of a regtech whitepaper entitled “Transforming Risk Management and Compliance: Harnessing the Power of Regtech” which addresses the barriers to adopting regtech, including budgetary constraints, solution availability and maturity, talent shortage, risk concerns and awareness of value.

Mr Yuen said, “There has been significant progress in regtech adoption in HK, with 32% of survey respondents having at least one regtech solution in their banks. HKMA’s 2025 vision for regtech includes positioning Hong Kong as a global leader and hub for nurturing regtech talent, extending adoption in HK’s banking sector, as well as growing regtech solutions.”

HKMA plans to host a flagship event on regtech in 2021, announcing a regtech challenge in the first half of 2021, and implementing a regtech knowledge hub and a regtech adoption index in the second half of 2021.

Regtech Association of Hong Kong (RTAHK) today released Hong Kong’s first Regulatory Technology (RegTech) landscape study, titled “2020 Hong Kong RegTech Map”. The study revealed that Hong Kong’s RegTech industry has expanded around 10 times in the number of RegTech companies in recent 5 years.

When talking about the challenges brought by the rise of fraud, Head of Risk Management at livi bank, Mr Spencer Leung, said, “The Hong Kong regulator has done a good job in preventing fraud, requiring banks to report anything suspicious to them. As a virtual bank, I believe we will need to work together, and with the regulator to understand the right things to do, and in educating customers.”

Advancing Fintech Across The Greater Bay Area

With an overall population of 70 million and a combined GDP at US$1.7 trillion (2019), The Guangdong-HK-Macao Greater Bay Area (GBA) is fast becoming one of the world’s largest markets for fintech companies, offering huge opportunities for them to secure funding, develop their business and scale.

Talking about the GBA Wealth Management Connect Scheme, Co-CEO & Executive Director of Ping An Group, Ms Jessica Tan, said, “With the scheme, we believe it can help bring on investors on both sides of the border and provide experience that is trusted, smooth and seamless. In addition, it will help retail investors gain access to more professional advice on picking investment products.”

Vice President of Tencent and Chairman of Fusion Bank, Mr Jim Lai, said,

“Fintech plays an integral part as an accelerated and integrated component to national development. There are two biggest challenges in Hong Kong’s quest tapping into the GBA market, one is an advanced eKYC capability that is central to the smooth operation of account opening; and the other is the cross-border regulatory sandbox that could deepen the collaboration between mainland China and Hong Kong.”

Featured image credit: Mr Eddie Yue, Chief Executive of the HKMA, delivers an opening keynote, screengrab via Youtube