Digital Finance Seminar Recap

What would a world look like where you could securely transfer funds as easily as sending a text message?

On Wednesday June 22nd Mazars Hong Kong joined with individuals from the financial industry to discuss the merits of digital finance. But first, what is digital finance?

Digital finance is often associated with a term called “financial technology,” or more commonly, “Fintech”. Fintech refers to the use of technology to disrupt historically stationary sectors of the financial industry with applications such as mobile payments, money transferring, asset management and fundraising. By creating a secure platform that allows for an efficient flow of money from one source to another, Fintech grants users with the ability to do business more easily and at a lower cost. By breaking down the traditional barriers associated with finance, Fintech can level the playing field for more business to get the capital they need, and move their ideas forward.

But naturally there are some questions that come with transferring large amounts digitally. What does the future of Fintech look like in Hong Kong? What type of advantages can come from this technology? What are the threats? These are the three main questions Mazars discussed on Wednesday.

We began our event with Annie Chan Partner of Mazars Hong Kong discussing the findings of a recent study from The Economist Intelligence Unit and Mazars. The study which surveyed more than 200 executives in the financial industry worldwide emphasized the growing importance of leading the industry in matters concerning ethical practices.

Among the companies surveyed, the key findings concluded that three-quarters of the companies said the use of data mining and/or enhanced data analytics raises potential ethical issues of its own. Most financial companies say they have turned ethical compliance into a competitive advantage, by improving their brand image. Three-quarters of the companies claim they are raising their ethical standards beyond regulation requirements – and using digital technologies to do so.

As this digital finance grows, those firms that can securely transfer money and ethically handle customer data will be the ones that set industry standards. Mr. Shu Pui Li, Division Head of Financial Infrastructure Development at the Hong Kong Monetary Authority is working to create an environment to do exactly that.

 As our keynote speaker Mr. Li stated how he and his team are hard at work to create an environment of healthy Fintech development in Hong Kong. The HKMA’s Fintech Facilitation Office (FFO) has three main focuses: creating regulatory dialogue, being an industry liaison, and creating research and application.

As an industry liaison the HKMA is working to partner with Cyberport, an area in Hong Kong that fosters entrepreneurs, and HK Science and Technology Parks to strengthen relationships and exchange ideas of innovative Fintech initiatives for Hong Kong.

The next focus for the FFO is to create an interface between market participants and regulators. To do this the HKMA will hold a series of sessions where HKMA regulatory departments will share supervisory expectations and observations.

To ensure that Hong Kong maximizes the use of Fintech the FFO will take on an initiatorrole for industry research into potential applications and risks of Fintech solutions. Their Cyber Fortification Initiative will have 3 key points: a Cyber Risk Assessment Model, a Cyber Threat Intelligence Platform, and Certification and Training.

Fintech has massive implications and the development already happening in Hong Kong is very promising. However we must tread carefully. Following Mr. Li, Moderator Rocky Tung took the stage with panelists Fredrick Chan, CFO of Chong Hing Bank, and Peter Bullock, partner at King & Wood Mallesons to discuss the opportunities and threats.

Mr. Chan noted that as a banker Digital Finance creates the opportunity to service a much larger customer base without the overheads of a network. Further, Digital Finance enables the ability to service customers through their mobile phones, while data analytics on customer behavior will allow for an easy means of reaching your target audience for supplementary services.

However integrating all of these accounts can lead to some major threats; Mr. Bullock stated during the panel discussion that, “data breaches are a matter of when, not if. That means that data security can be used as a competitive advantage.”

To drive this point even further, Mr. Chan made the analogy that when you lose a wallet someone has a nice meal, but when you lose all the balances in your integrated accounts you now have to work longer for retirement.

The development of Fintech in Hong Kong is exponential, that much is clear. But what type of regulation will be developed and how will ethical behavior directly correlate with utilizing customer data is still being determined.