Hong Kong's financial technology is getting traction

August 13, 2019 17:01
The HKMA has taken a series of initiatives to bolster Hong Kong's status as an international financial center, including the licensing of virtual banks. Photo: Bloomberg

Innovative technology continues to transform traditional industries. 

The Hong Kong Monetary Authority (HKMA) has launched a series of initiatives to bolster the city's status as an international financial center. At the end of last year, it started issuing virtual banking licenses.

With virtual banks, Hong Kong can offer an extensive range of financial products and services not only to customers of local and traditional banks but also to those in mainland China and around the world.

The HKMA has also opened an application programming interface (APl) to enable startups to develop their own applications (apps).

In fact, Hong Kong is one of the five ecosystems with the fastest-growing number of startups in the world. According to research by Whub, a startup community, about 14 percent of over 3,000 startups in the city are engaged in financial technology (fintech). And these APIs are the new fuel for innovation.

In January this year, Jetco announced that it provided about 200 APIs from 13 banks, including  Bank of East Asia (00023.HK), Citibank, Bank of Communications (Hong Kong) (03328.HK) and OCBC Wing Hang Bank (00302.HK).

The new API exchange platform JETCO APIX covers product and service information including deposits, foreign currency exchange, loans, investments, insurance and general banking services.

It allows banks, third-party service providers and program developers to develop new products in a secure and standardized environment at lower cost, and launch the products and services to the market within a shorter time. The platform also provides a sandbox to test their products.

When we talk about the sandbox for testing innovative financial products, we should not forge the global financial sandbox available via the Global Financial Innovation Network. The first pilot cross-border testing program has been launched to allow Hong Kong regulatory bodies to closely monitor innovative cross-border financial technology products. At the same time, local startups can also seize the opportunity to expand to the international market.

The United Kingdom-led Global Financial Sandbox was officially launched in the second quarter of this year. It allows innovative fintech products to be tested across different regions for six months. There are 35 global regulatory bodies participating in the test, including those from the UK, the United States, China, Canada, Singapore, Australia, and Dubai.

The HKMA and the Securities and Futures Commission are members. There are eight companies participating in the first phase of the testing, and three of them use Hong Kong as one of the testing sites.

The most popular test is regulatory technology (reggech), which is part of A New Era of Smart Banking promoted by the HKMA. Hong Kong has a fairly good understanding of international regulations and their requirements.

As pointed out by Professor Kar Yan Tam, dean of the School of Business and Management at the Hong Kong University of Science and Technology, the city has taken decades to develop the trust of the international community. This, along with the Chinese and English bilingual advantages of local talents as well as the city's favorable geographical location, has enabled Hong Kong to expand its business to the mainland, Macau, Taiwan and Southeast Asia.

Chan Ka-keung, the former secretary for financial services and the treasury, said virtual banking and the Faster Payment System will become the backbone of Hong Kong's fintech development.

The problem is "how to deliver a good customer experience". Reaching out to the international market should be the next step. As fintech has huge business potential, it is up to us to grasp the opportunity and strengthen Hong Kong's status as an international financial center.

– Contact us at [email protected]


Adjunct Professor, Department of Computer Science, Faculty of Engineering; Department of Geography, Faculty of Social Sciences; and Faculty of Architecture, The University of Hong Kong