Speech by Ir. Allen Yeung, JP, Government Chief Information Officer, at the “Future Finance – Adapting to Disruption” (with photo)

Daniel (Editorial Director, FinanceAsia, Mr Daniel Flatt), Sanjeev (Managing Director, Asia Region Head, Financial & Risk, Thomson Reuters, Mr Sanjeev Chatrath), distinguished guests, ladies and gentlemen,

Good morning. It gives me great pleasure to join you at today’s FinTech symposium organised by Thomson Reuters.

Today’s topic “Adapting to Disruption” implies that Disruption is a norm. The question is how you would adapt to it. As always, technological advancement can transform the society, disrupt an industry and challenge the market incumbents.

According to a study by PwC, 88% of the global financial services executives are worried about their business being at risk to start-up FinTech companies; on the other hand, over 80% of incumbents expect to increase partnerships with FinTech companies in the following three to five years.

Sounds contradictory, but not. We have heard the term “Coopetition” for some time. Only this time, it is more intense. Such partnerships help the financial institutions bring innovative solutions to the market quickly. FinTech companies also benefit from access to large data sets for testing new models and the expertise of veterans. To the financial services industries as a whole, this collaboration will invigorate the industry and foster the further development of FinTech.

The huge potential of FinTech can best be demonstrated by the strong growth in global FinTech ventures which amounted to US$23 billion in 2016, which is an increase of 10% compared to the previous year.

Growth in FinTech investment in Asia-Pacific is even greater. It has been more than doubled to US$11.2 billion in 2016, surpassing that of North America, at US$9.2 billion, and Europe, at US$2.4 billion.

In addition, the ten largest FinTech investments in Asia Pacific in 2016 came from China and Hong Kong, accounting for 82% of all Asia-Pacific FinTech investments.

Hong Kong has long been an international financial centre. With our vibrant start-up community and world-class information and communication technology infrastructure, we have strong credentials to be an international FinTech hub. Thanks to the concerted effort of the Government, financial regulators, and innovation hubs and accelerators all across the city, the local FinTech ecosystem is gradually building up.

During 2014 and 2016, Hong Kong attracted about US$400 million of venture capital investment in FinTech companies, almost tripling that of Singapore over the same period.

Besides, our home-grown FinTech startups also score excellently. One of the well-known examples is the WeLab that operates mobile lending platforms for Hong Kong and the Mainland. Making use of artificial intelligence (AI), it offers a fully automated process for making credit decisions for individual borrowers in a matter of minutes. It has raised US$220 million in its latest funding round last November.

TNG, another notable local start-up, provides e-wallet services and is one of the Stored Value Facility licensees of Hong Kong. It raised a new funding of US$115 million last September to ramp up its reach into global markets.

Cyberport alone has attracted over 250 FinTech start-ups in the last couple of years engaging in different types of financial services. They will certainly continue to flourish riding on the advancement of three key technologies, i.e. cloud computing, big data and AI.

Cloud computing is omnipotent, agile and indispensable in the modern business environment for central data repository and applications processing.

Big data empowers financial services institutions to adopt a data-driven and big data analytics approach to grow their businesses and enhance customer insights.

Aside from machine learning, AI has powered robo-advisors and chatbots. They give financial and investment advice to clients and answer customer’s queries.

The “Power of the 3”, i.e. cloud, big data and AI, will provide banks and other financial institutions with many opportunities for service enhancement, cost-saving and the roll-out of new businesses.

From a macro perspective, the “Power of the 3” can also help build Hong Kong into a smart city that enhances people’s living quality, improves city competitiveness and addresses urban challenges.

Last December, the Government issued the Smart City Blueprint outlining a basket of measures for the next five years covering six major areas, namely, "Smart Mobility", "Smart Living", "Smart Environment", "Smart People", "Smart Government" and "Smart Economy". Many of these measures will facilitate FinTech development and strengthen the financial services industry.

A noteworthy component of the Smart City Blueprint that warrants special mention is the provision of an electronic identity, i.e. eID, for all Hong Kong residents by 2020 for conducting government and commercial transactions online.

The eID is a single digital identity and authentication that can save the trouble of keeping different user names, passwords and security tokens for different services. By means of cloud computing technology, the eID will be used in a virtual form accessible any time anywhere through mobile phones or other Internet platforms. The latest international security standards will be adopted to ensure security.

While eID is a key digital infrastructure for smart city development, it also offers opportunities for financial institutions to adopt technology in transforming its business, such as online banking, mobile banking and online peer-to-peer payments.

One of the barriers to FinTech development is the verification of customers’ identity and ascertaining their suitability and preferences for acceptance as new customer and ongoing Know Your Customer (KYC) onboarding. In future, eID with a central repository of individual identity accessible on the cloud may be a key to the solution.

“Smart Economy”, one of the six areas of Smart City Blueprint, intends to transform and strengthen Hong Kong’s economy by means of technology. Developing FinTech can surely reinforce financial services, one of the pillar industries of Hong Kong and an essential part of Hong Kong’s economy. And in doing so, it will stimulate the growth of technological inventions and develop the innovation and technology industry as a new pillar of the economy.

Andy Grove once said “Only the Paranoid Survive”. Today, only adapting to disruption survives. I wish you all enjoy the symposium.

Thank you.

- ENDS -