Developments in financial services technology have undoubtedly given more power to the consumer – people can now demand faster, cheaper and more convenient services from banks, which must now compete with technology firms permeating the financial services space.
In Asia, the Hong Kong Monetary Authority (HKMA) has embarked on several initiatives to prepare the country’s banking sector for a move towards a ‘smart banking era’. Concerning core infrastructure, the central bank launched the Faster Payment System (FPS) to cut costs and improve the efficiency of payments. The new system enables customers to transfer funds around the clock across bank accounts and e-wallets with the use of account proxies such as mobile phone numbers or email addresses. As of May 2019, the FPS has processed 16 million transactions involving an aggregate amount of HK$322 billion (US$41.2 billion) and RMB9 billion (US$1.3 billion).
Among more traditional financial players, the central bank has encouraged incumbents to embrace new technology through the work of the Banking Made Easy task force. To create a more conducive regulatory environment, the taskforce seeks to reduce regulatory frictions that might be hindering technology adoption.
Not wanting traditional players to fall behind, the HKMA has offered assistance to incumbents through the introduction of the Open application programming interface for the banking sector (Open API) policy framework, which allows banks to open up their internal systems and data for programmatic access by third-party service providers. The adoption of the Open API has helped foster collaboration between banks and tech firms.
The central bank was also one of the first to establish a fintech supervisory sandbox and chatroom to allow banks and technology firms to conduct pilot trials of fintech products in a controlled environment. While in the sandbox, firms do not need to achieve full compliance with the HKMA’s supervisory requirements. In return they provide an inside look into how the sector is developing. When they transition to market, firms must meet the full requirements.
Looking to lead by example, the central bank has also examined how technology could improve its in-house processes. Over the past 18 months, the HKMA has conducted various proof-of-concept trials to explore distributed ledger technology. The result has been the development of a blockchain-based trade platform, eTradeConnect, launched by a consortium of major banks in Hong Kong.
Along with a select group of central banks and regulators, the HKMA has taken its sandbox one step further by co-founding the Global Financial Innovation Network. Now comprising 38 organisations, the group has recently begun discussions on forming a global sandbox.
The HKMA has recognised that recent technological innovations and rising aspirations of customers call for more personalised and integrated services. For taking early action to remain ahead of the curve, it wins this year’s Global Impact Award.