Can Hong Kong embrace the technology revolution in global finance?

Hong Kong's position as an international financial centre is under major threat. The liberalisation of policies on the mainland is diminishing many of Hong Kong's traditional advantages. Arbitrage opportunities are reducing. Other international financial centres are competing aggressively for cross-border renminbi flows. Regulations are tightening.

While Hong Kong is home to some of the best bankers in the world, the future will be decided instead by a new form of competition. The new battleground is financial technology.

Banks face a simple choice - either adapt and compete, or face extinction. Can Hong Kong re-invent itself to retain its position, with so many new business models attacking traditional players?

Banks in Hong Kong have enjoyed margins unimaginable in most industries. To a nimble start-up, that equals opportunity. Banks have historically been obsessed with benchmarking among themselves. But this time, the threat isn't traditional competition. A new breed of players is entering. These companies are built in the cloud. They are mobile first. They are technology, social or e-commerce players largely unencumbered by policy and regulation. These new players are able to arbitrage their own massive scale and customer reach to create new revenue streams.

Incredible advances in data science and artificial intelligence are creating new models for banking services. They are not burdened by the myriad of legacy systems, layers of procedures and controls, or expensive physical distribution networks and call centres that virtually every bank must manage.

A decade ago, most would think it unimaginable that the likes of Alibaba, Apple, eBay (PayPal), Google and Tencent would be in the business of providing financial services. While these companies were creating entirely new ways of delivering financial services, banks focused mostly on how to put traditional banking on a mobile platform and enhancing internet capabilities. It is hard to find an example of a bank that has succeeded to the extent of these new players.

Banking and financial services sit right at the heart of Hong Kong's economy, accounting for approximately 15 per cent of gross domestic product. None of the new technology players mentioned here are domiciled in Hong Kong. However, we are seeing the emergence of a new wave of local financial technology start-ups as well as foreigners choosing to launch their business here, attracted by the many advantages Hong Kong still enjoys.