Ushering in a new era for Hong Kong with FinTech
Earlier this year, Switzerland-based International Institute for Management Development (IMD) ranked Hong Kong as the world’s most competitive economy for the second time in a row. The news instantly hit front pages of local newspapers, albeit without much celebration from the society. That’s understandable, given Hong Kong’s long-standing position as ‘Asia’s World City’ - a leading global financial centre with one of the most vibrant economies. However, the really interesting part in that report was the special importance given to ‘digital competitiveness’.
For the first time ever, IMD included a separate ‘digital competitiveness’ ranking for all 63 economies on its list – gauging how adaptive and agile markets are when faced with technological changes. Although Hong Kong topped the list under ‘government and business efficiency’, we only took the seventh spot in digital competitiveness – behind Singapore, Sweden, the USA, Finland, Denmark and the Netherlands.
Gainsayers will probably argue that Hong Kong is first and foremost a world-class financial centre in the same league with New York and London, and not a technology hub like Silicon Valley. Indeed, the financial services industry’s contribution to our 2015 GDP was more than 17.6%. Paradoxically, this argument also highlights the need for this sector to adopt innovative technologies in order to maintain its pre-eminence in the rapidly evolving global economy.
More than just a fancy term, Financial Technologies or FinTech is a key driver of the sector’s future growth. Hong Kong has already taken some ambitious initial steps to become a premier FinTech hub. The SAR Government’s Secretary for Innovation and Technology, Mr Nicholas W Yang, pointed out in a 2016 forum that “48 of the global top 100 FinTech companies are operating in Hong Kong.” Over the years, our Government has actively promoted innovation in technologies, including FinTech. Establishing the Hong Kong Applied Science and Technology Research Institute (ASTRI) in 2000 was an important step in that direction.
As one of the city’s largest technology developers, ASTRI has a very simple mission: to enhance Hong Kong’s competitiveness in technology-based industries through applied research. It undertakes R&D in different fields, but focuses on five specific areas of applications – one of which is FinTech. ASTRI’s FinTech initiatives are carried out along a few distinct workstreams including cybersecurity, blockchain, big data analytics, and artificial intelligence.
In the recent past, ASTRI took on a number of FinTech initiatives by partnering with industry players and regulators alike. As a partner in Hong Kong Monetary Authority’s (HKMA) Cybersecurity Fortification Initiative, ASTRI facilitates industry-wide cyber intelligence sharing, and facilitates training and certification of cybersecurity professionals. It has developed Hong Kong’s first Cyber-Range, in partnership with Hong Kong Police Force and the financial services industry. It runs professional training and development programmes for those seeking accredited certification in cybersecurity management.
As modern societies generate, collect and store a swelling volume of business and consumer data, ‘big data’ becomes increasingly precious for every industry, more so in financial services. Operating with a strong and highly capable ‘big data analytics’ team, ASTRI leverages various technology platforms as well as machine learning, deep learning and graph algorithms to provide data management, analytics and regulatory solutions. Hong Kong’s banks need to do more with big data - to serve customers better and to fight better against financial crime and risks. ASTRI plays its part to help the industry in that journey.
According to a March 2017 Forbes report, around 80% of banks around the world are working on Blockchain applications. When Barclays carried out the world’s first trade transaction using Blockchain in September 2016, it was a revolution - streamlining a process from two weeks to less than half a day. Blockchain can improve and transform many sectors including banking and finance. Commissioned by the Hong Kong Monetary Authority (HKMA), ASTRI developed a Whitepaper on Distributed Ledger Technology in November 2016. Using a solution developed by ASTRI, Bank of China (Hong Kong) last year launched a Blockchain-powered property valuation tool, making it potentially one of the first services of its kind to be commercialised in Asia. In the early part of 2017, ASTRI and Deloitte have each conducted proof-of-concept exercises of Blockchain-based trade finance, in collaboration with HKMA and several banks.
In addition, ASTRI has partnered with a few other players in the financial services industry from banks to service providers, helping the sector to explore practical FinTech applications using various tools including artificial intelligence, machine learning, biometric authentication and Blockchain-based identity management.
Back in the mid-90s, contactless payment cards were considered a wonderful innovation. Fast forward to the 21st century: solutions like Alipay and WeChat Wallet have become ordinary parts of citizens’ daily lives in the Mainland. China has indeed leapfrogged to become a prolific centre of global FinTech innovation and adoption – thanks in part to easy access to capital, regulatory facilitation, and a meteoric growth in e-commerce.
The momentum in the Mainland presents Hong Kong with a world of potential. We must leverage the China factor to overcome market inertia and spur consumer adoption of new ways in the delivery of financial products and services. While Government policies and its regulatory framework protect the stability of our financial services industry, they also need to facilitate dynamic and innovative forces that can bring about much needed changes. Perhaps the time is ripe for us to explore ways to build alliances in FinTech ecosystems and platforms between local players and their counterparts in Mainland China, and possibly beyond our national border, to usher in new business models.