Hong Kong SAR: HKMA’s Fintech 2025 Strategy

https://www.linklaters.com/en/insights/blogs/fintechlinks/2021/june/hong-kong-sar-hkmas-fintech-2025-strategy
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The HKMA’s Chief Executive Eddie Yue has said that banks should be going ‘all-in’ with comprehensive fintech adoption in the next 4 years.

The comments were made in a speech unveiling the HKMA’s ‘Fintech 2025’ strategy, which touched on five main areas:

1. All banks to go fintech, but the HKMA will digitalise too

Banks are encouraged to fully digitalise their operations, from front-end to back-end for 2025. The HKMA will perform Tech Baseline Assessments to review where banks are and what their plans are. The target is for banks to submit a Three Year Plan for technology adoption in Q4 2021, which the HKMA will then assess and benchmark against overseas peers.

This will allow the HKMA to identify fintech business areas or technology types which may be underdeveloped, and would benefit from HKMA support. The HKMA continues to “walk the talk” by digitalising its supervision of banks through the use of advanced technologies.

2. Central Bank Digital Currencies for wholesale and retail too

CBDCs are an area in which the HKMA has been busy carrying out research. A new study will begin on e-HKD to understand its use cases, benefits, and related risks, and the HKMA will also continue to collaborate with the People’s Bank of China in supporting the technical testing of e-CNY in Hong Kong for cross-boundary payments for both domestic and mainland residents.

3. Next-generation data infrastructure

New data infrastructure that the HKMA will be working on includes the Commercial Data Interchange, digital corporate identity, and DLT-based credit data sharing platform.

4. Expanding the fintech-savvy workforce

The HKMA is working with the private sector and with universities to increase internship programs in fintech areas, as well as launching a new fintech module for the Enhanced Competency Framework to raise the professional competencies of existing banking practitioners.

5. Funding and policies

Recognising that encouraging banks will stimulate innovation, the HKMA will also be looking at funding and policies. For example, the HKMA is exploring the possibility of providing funding support to qualified fintech projects in the Fintech Supervisory Sandbox, as well as working with the private sector to offer further types of support.

HKMA support for banks

The HKMA is providing support to banks as part of this strategy to ensure a wide and consistent fintech implementation. This support comes in the form of initiatives that are more traditionally supervisory focused, such as future supervisory guidance to facilitate the uptake of novel technologies and the publication of a “Regtech Adoption Practice Guides” series to address how regtech solutions can be applied to cloud computing, blockchain and anti-money laundering surveillance.

However, the promise of steps such as analysing where there are lacunas in banks’ technological implementation, upskilling the workforce and working on projects with the assistance of the private sector along with additional funding, has the potential to make the changes at a deeper level which allow for more sustainable change, rather than simply placing additional requirements on banks and expecting them to catch-up.

Impact for the region

While some of the details are yet to be published, the unveiling of this strategy demonstrates that the HKMA believes in the importance of fintech as a key growth engine in the financial services in Hong Kong, and as a way to deliver fair and efficient financial services in Hong Kong. This should therefore mean that there is an increased drive to  implement fintech solutions in the banking industry in Hong Kong in the coming years.

https://www.linklaters.com/en/insights/blogs/fintechlinks/2021/june/hong-kong-sar-hkmas-fintech-2025-strategy