MOTION ON “PROMOTING THE DEVELOPMENT OF A FINANCIAL TECHNOLOGY HUB TO REINFORCE HONG KONG’S POSITION AS AN INTERNATIONAL FINANCIAL CENTRE”
MR CHAN CHUN-YING (in Cantonese):
Deputy President, I move that the motion, as printed on the Agenda, be passed. Financial technologies (“Fintech”) generally refers to the application of technologies in financial services, whereby technology is used to innovate financial products, change operation modes and streamline business processes so as to offer clients a better user experience. In recent years, Fintech has been developing rapidly like a wildfire. Thanks to acceleration of iteration, popularization of the use of Fintech, globalization of markets, provision of real-time services, technological conversion of elements, etc., Fintech has gradually become the newest driver and growth area of global financial and economic developments.
Fintech can add value to financial services, which will play a positive role in reinforcing and raising Hong Kong’s position as an international financial centre. In recent years, due to the Government’s active promotion, Hong Kong’s Fintech development has also been catching up expeditiously. Last year, the Hong Kong Monetary Authority (“HKMA”) released the Open Application Programming Interface for the banking sector to prepare Hong Kong for a new era of Smart Banking. HKMA will issue the first batch of virtual banking licences in this quarter; at the end of last year, eTradeConnect, a large-scale inter-bank and inter-enterprise blockchain-based platform, has also been commissioned, indicating growing popularization and application of Fintech.
The motion on “Promoting the development of a financial technology hub to reinforce Hong Kong’s position as an international financial centre” that I move today seeks to urge the Government to adopt effective measures to entice Fintech enterprises and talents to establish their bases in Hong Kong, encourage local tertiary institutions to offer more professional Fintech courses and increase the Fintech adoption rate in society as a whole, so as to comprehensively accelerate the pace of Hong Kong’s Fintech development and reinforce Hong Kong’s position as an international financial centre.
Deputy President, I believe that the financial sector is unquestionably important to Hong Kong because it not only accounts for about 18% of Hong Kong’s Gross Domestic Product (“GDP”), but its per capita GDP is also the highest among all sectors. The Global Financial Centres Index published by the United Kingdom finance think tank Z/Yen Group and the China Development Institute last year ranked Hong Kong in the third place just after London and New York. However, as we are also aware, given the extremely intense competition among global financial centres, it is necessary for Hong Kong to progress with the times in order to maintain its current leading position. Otherwise, Hong Kong will fall behind very easily.
Although Hong Kong’s Fintech development scale has not been very noticeable so far, we still have quite a few favourable conditions for developing Fintech. The Connecting Global FinTech: Interim Hub Review 2017 published by Deloitte ranked Hong Kong the sixth most important Fintech hub in the world. The Global Innovation Index 2018 also ranked the Shenzhen-Hong Kong technology cluster, formed by the innovation and technology sectors of Hong Kong and Shenzhen, the world’s second largest technology cluster. The country has also fully affirmed Hong Kong’s possession of solid technological foundation and high-quality talents and supported Hong Kong’s development into an innovation and technology centre. Statistics have also shown a persistent upward trend in the amounts of Fintech investment acquired by Hong Kong, from only US$108 million in 2015 to US$546 million in 2017.
Same as the traditional banking industry, Fintech relies on talents for rapid development. However, there is currently a shortage of Fintech talents around the world, and Hong Kong is of no exception. According to the findings of the Talent Development Survey published by the Hong Kong Institute of Bankers in December last year, as high as 97% of respondents agreed that banking practitioners should enhance Fintech capabilities, but only 44% had taken relevant training courses. The survey has also found that 63% of respondents saw a serious skills gap in the local banking industry, particularly in the two areas of Fintech and cyber-security. In order to narrow the skills gap, 55% of respondents believed that internal training had to be provided by banks and financial institutions, while 20% of respondents considered it necessary to admit relevant experts from outside Hong Kong.
In recent years, universities in Hong Kong have successively launched Fintech-related courses. However, as the demand for the places far exceeds the supply, the number of graduates trained each year has been very limited. Since manpower training takes time, the supply of talents has failed to meet the current market demand in a timely manner. Frankly speaking, the internal training provided in the industry is just at its initial stage. To develop Fintech, Hong Kong must expedite the training of local talents and attract talents from other regions at the same time.
Deputy President, quite a number of Fintech-related studies have suggested that the following few elements are essential for the development of a Fintech hub: markets, talents, capital, government support and regulatory regime. In my view, whether the Government will adopt a proactive attitude, formulate forward-looking policies and take sustainable actions are the key factors for determining whether Hong Kong can promote continuous development of Fintech.
Next, I would like to discuss a few points. First, I would like to comment on the Government’s policies on Fintech, which I would describe as “chicken ribs”. On taxation arrangements, the Legislative Council passed the Inland Revenue (Amendment) (No. 3) Bill 2018 last year, under which qualifying expenditures on research and development (“R&D”) and on related activities are eligible for super (i.e. double) tax reduction. However, as I had pointed out at the relevant Bills Committee, whenever a financial innovation is introduced, the financial sector would be required by the regulatory body (i.e. HKMA) to arrange for a third-party professional body to give advice and conduct tests, but the fees for those tests will not be eligible for super tax reduction. In addition, the expenditures on joint R&D projects (i.e. financial innovations) by financial institutions and their parent companies located outside Hong Kong are also unlikely to qualify for full tax concessions.
On the other hand, the Hong Kong Cyberport Management Company Limited has also launched the “Easy Landing” Scheme to entice multi-national companies to set up offices in Cyberport with a rental concession policy. However, as I had pointed out at a meeting of the Panel on Information Technology and Broadcasting, the Government has put forward a proposal to offer eligible companies a rental concession of $1 million or 50% of the rental for a period of up to five years. In the eyes of leading Internet enterprises and Fintech companies, I believe that this subsidization measure is in fact insignificant. How can these enterprises be convinced to establish their bases in Hong Kong?
I agree that it is difficult to tactfully formulate attractive policies while not being criticized for transferring benefits. Nevertheless, I still hope that the Government will be committed to introducing reasonable and justifiable subsidization measures, such as tax concession, which can meet the challenges in order to attract local and overseas financial institutions to continue to jointly conduct R&D with Fintech companies.
Secondly, I would like to discuss the Fintech regulatory regime. While stringent regulatory legislation will restrict the room for innovation, haphazard relaxation may also attract overseas enterprises with practical market experience and know-hows to vie with each other to propose innovation proposals, creating chaos in the market. A typical example is crowd-funding for virtual currencies or relevant activities. In my view, this type of financial products should be carefully studied by regulatory bodies before being allowed to enter the public market. For this reason, I propose relaxing the regulation in an orderly manner to serve the best interest of Hong Kong’s Fintech development. Regulatory bodies should, under a controlled environment, gradually relax or amend the current regulatory legislation in order to support and promote accelerated innovation of the local banking industry.
The Fintech Supervisory Sandbox (“FSS”) launched by HKMA in 2016 is a very good attempt. FSS allows banks and their partnering Fintech firms to conduct pilot trials of research projects, without the need to achieve full compliance with HKMA’s compliance requirements. So far, about 40 technological deliverables have been tested. I suggest further expanding the scope of the FSS scheme by, for example, encouraging local financial institutions to step up cooperation with their counterparts in other regions, and extending the pilot area to other neighbouring technologically advanced regions, such as the Qianhai area in Shenzhen.
Third, perfect the Fintech ecosystem. To develop a Fintech cluster, the formation of cohesion is a very important factor. Singapore’s Fintech hub LATTICE80 occupies an area of 30 000 sq ft; Hong Kong’s Cyberport currently provides four office buildings with an area of over 90 000 sq ft, but tenants are not limited to Fintech companies. The Government may stress that these Fintech enterprises may choose to station in Cyberport, the Hong Kong Science Park or the future Lok Ma Chau Loop. However, the planned sites are too scattered. I hope that the Government will deepen R&D on Fintech and the long-term planning of office parks, and provide R&D locations which are more concentrated.
Timely protection of Fintech’s R&D deliverables by a government is also one of the important incentives. The Intellectual Property Office of Singapore has launched a service known as the FinTech Fast Track Initiative to significantly reduce the long time needed for processing Fintech patent application in the past, shortening the target time from two to four years to within half a year. I hope that the Government will also review and shorten the time needed for processing Fintech patent application so that Hong Kong will not lag behind in this regard.
Fourthly, allocate additional resources to technological research infrastructure and manpower training. The IMD World Talent Ranking 2018 has identified Europe as the place with the most competitive talents. What the European nations have in common are their high investments in education and their quality of life. Hong Kong’s investments in R&D have all along been remarkably lower than those of other countries and regions. Although the SAR Government has set a target to raise R&D expenditure to 1.5% of GDP by 2022, the Government does not always have much confidence in achieving it. If the Government is willing to take the lead in increasing investments in technological research infrastructure and manpower training, I believe that it will not be difficult to achieve the targeted ratio.
Fintech R&D requires substantial expenditure. The willingness of enterprises to allocate such huge amounts of resources in the long run depends on whether R&D can achieve remarkable results. The FSS I mentioned just now is a good example which can expedite the launch of bank products, gauge market reaction and reduce the risks of new products. However, I hope that the Government can provide more Fintech infrastructure and support. Examples of Fintech infrastructure include the Know Your Customer Utility (“KYCU”) platform―a centralized customer database currently being developed―and a credit database operated by commercial institutions. What is noteworthy is that KYCU is currently targeted at enterprises but not individuals. The Government should take the lead in turning KYCU into a public service in order to boost public confidence and enable the sector to shift their attention to Fintech R&D and increase investments in customer service.
In addition, when developing university curriculum, the Government should integrate STEM (Science, Technology, Engineering and Mathematics) education curriculum and the Fintech industry through a collaboration programme in order to provide more training options. This is also a recommendation made by a survey on global shortage of Fintech talents conducted in 2017.
Meanwhile, although Fintech is a product of the information technology age, long-time practitioners of the industry can also help address the shortage of Fintech talents as long as they are given appropriate training. In Singapore, the National Trades Union Congress, polytechnics and Fintech association have launched Fintech training programmes since 2017. I urge the Government to, in collaboration with the industry, expeditiously offer online courses tailored to the industry’s needs and award appropriate qualifications and professional recognition to enable bank employees to arrange their learning time with flexibility, engage in self-improvement and cope with the changes in the technical requirements in the industry. In addition, the Government should also expeditiously admit talents from other regions, with particular emphasis on Fintech talents. Only with this two-pronged approach can the current talents gap be possibly plugged.
Deputy President, not only can Fintech facilitate the evolution of smart products and services which will benefit the financial industry, Fintech application will also enable financial services to infiltrate into the life, consumption, travel, etc. of the public, thereby achieving financial inclusion.
I will stop here for the time being. I hope to listen to the views expressed by other Members on the motion first. Thank you, Deputy President.
Mr CHAN Chun-ying moved the following motion: (Translation)
“That it is stated in the Chief Executive’s 2017 Policy Address that ‘[a]s an international financial centre with a highly-developed information and communication technology sector, Hong Kong is an ideal place for the development of financial technologies’; in this connection, this Council urges the Government to adopt effective measures to entice financial technology (‘Fintech’) enterprises and talents to establish their bases in Hong Kong, and encourage local tertiary institutions to offer professional Fintech courses, so as to increase the Fintech adoption rate in society.”
SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese):
President, first, I have to thank Mr CHAN Chun-ying for moving the motion for debate, and Mr CHAN Kin-por, Mr Dennis KWOK, Mr Charles Peter MOK, Mr WONG Ting-kwong and Mr Christopher CHEUNG for proposing the amendments, so that we have the opportunity to report our work on promoting financial technology (“Fintech”) to the Legislative Council and exchange views on relevant issues.
In recent years, developing Fintech has become the major international trend. Not only can Fintech development innovate financial services to make life convenient for the public, it can also raise the overall competitiveness of Hong Kong’s financial service industry and reinforce Hong Kong’s position as the leading international financial centre in Asia. In fact, as a financial centre, Hong Kong ranks third globally and first in Asia, and it is even the leading fund management hub in Asia. For the 10 years since 2009, Hong Kong has topped the world in terms of funds raised through initial public offerings for six years. In addition, Hong Kong is the world’s sixth and Asia’s second largest international banking centre, with 77 of the world’s top 100 banks operating in Hong Kong. Hong Kong is also the world’s fourth largest centre for foreign exchange trading.
The policy objective of the SAR Government in developing Fintech is to combine Fintech―which has been actively promoted by the current-term Government―and our existing advantages in financial services in order to develop Hong Kong into a vibrant Fintech hub in the Asian region. While nurturing local Fintech talents, Fintech talents from overseas and the Mainland are given new opportunities for exchanges and exploration in order to sustain the robust development of Hong Kong’s Fintech ecosystem.
As an international financial centre, Hong Kong boasts quite a number of advantages for developing Fintech. Apart from a highly developed information and communications technology industry, Hong Kong has clearly defined financial law and regulations. In addition, since our sound regulatory regime has been aligned with international standards, Hong Kong has all along been an ideal business location for international financial institutions. Under “one country, two systems”, Hong Kong is a highly open and international city characterized by a free flow of talents, capital and information. These unique advantages have turned Hong Kong into an ideal place for developing Fintech.
As advocated by the Chief Executive in the Policy Address, the Government should play the roles of “facilitator” and “promoter” in fostering economic development. To give impetus to Fintech development, we should also play the roles of “facilitator” and “promoter” by promoting Fintech development in five aspects, namely promotion, support measures, regulation, talents and capital. With the concerted efforts of the Government, financial regulators and the industry, Hong Kong’s Fintech ecology will thrive even further. At present, over 500 Fintech start-ups and companies have established their bases in Hong Kong; world-renowned innovation laboratories and accelerator programmes, for example, the Accenture Fintech Innovation Lab, Deloitte’s Asia Pacific Blockchain Lab, Israeli Fintech platform The Floor, etc., have established their presence in Hong Kong one after another.
President, I will now continue to listen to Members’ views on the motion and the amendments, and then give a consolidated response in my concluding speech. Thank you, President.
SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY (in Cantonese):
President, I would like to thank Mr CHAN Chun-ying again for moving the motion and all Members for their valuable opinions. Also, I am glad to note that all Members who have just spoken support the Government to strengthen our efforts in promoting the development of financial technology (“Fintech”) in Hong Kong. As I said in my opening speech, the Government has long adopted a five-pronged approach, namely promotion, facilitation, regulation, talents and funding, to facilitate Fintech development. Given that all of the Members’ suggestions fall within these five areas, I will first speak on our Fintech policies and current efforts in each of these areas before responding to the major arguments and suggestions of individual Members.
In respect of promotion, a dedicated Fintech team (“the team”) has been set up by InvestHK to appeal and assist overseas Fintech companies, start-up entrepreneurs, investors, incubators, etc., to establish a presence in Hong Kong. The team has rendered assistance to more than 450 Fintech companies and appealed 15 innovation laboratories and accelerators to station in Hong Kong since its establishment in September 2016. It also organizes and supports a wide range of activities, including the annual event “Hong Kong Fintech Week”, to promote our Fintech industry. Last November, the Hong Kong Fintech Week drew more than 8 000 attendees from over 50 places, and some Members present right now were also invited. On the last day of the Hong Kong Fintech Week, we stepped out of Hong Kong for the first time to visit Shenzhen and learn about the Fintech development in the Mainland. The Shenzhen Day was an opportunity to connect Fintech communities in foreign countries, the Mainland and Hong Kong, promote exchanges and cooperation, and create business opportunities, highlighting the unique advantages and functions of Hong Kong.
On the other hand, the Government and financial regulators have signed Fintech cooperation agreements with countries such as the United Kingdom, Singapore, Switzerland and Dubai to establish a Fintech cooperation and exchange network. For example, under the Fintech Bridge Agreement between Hong Kong and the United Kingdom, Fintech companies on both sides may use the supporting facilities available in the other place. InvestHK and the Department for International Trade of the United Kingdom also held a Fintech competition in London and Hong Kong in March and October 2018 respectively. In the Hong Kong Fintech Week 2018, trade representatives from the United Kingdom were present to tap the Asian market.
The second area is facilitation. Smart Space Fintech in Cyberport was opened in 2016 to serve as an operational base for start-ups. Meanwhile, Cyberport has provided a series of incubation and acceleration programmes, as well as funding schemes, to support entrepreneurs and start-ups with all necessary resources and funds. Meetings with investors will also be arranged to provide networking opportunities. The newly-launched Overseas/Mainland Market Development Support Scheme provides financial subsidy to support start-ups in conducting market research and promotion, participating in trade fairs outside Hong Kong and expanding into overseas markets. Thanks to these facilitation measures, the Fintech community in Cyberport has become vibrant and the Fintech start-ups there have so far raised more than $1.5 billion.
As regards Fintech infrastructure, the Hong Kong Monetary Authority (“HKMA”) launched the Faster Payment System (“FPS”) in September last year to connect banks and stored-value facility (“SVF”) operators on the same platform for the public to transfer funds anytime, anywhere, across different banks or SVFs with funds available almost immediately by using the payee’s mobile phone number or email address as an account proxy. As of the end of 2018, FPS received a total of over 2 million registrations and processed over 4.81 million transactions, with transaction amount totalling around HK$105 billion and RMB2.8 billion. The average daily transaction number and value were about 50 000 and HK$1.1 billion respectively. The Government is now exploring the use of FPS to provide the public with convenience in paying government bills through the mobile apps of different banks and electronic wallets, thereby promoting the development of mobile payment market.
eTradeConnect, another Fintech infrastructure launched last October, was developed by a consortium of 12 banks in Hong Kong to improve trade efficiency, reduce risks and facilitate trade counterparties to obtain financing by digitizing trade documents, automating trade finance processes and leveraging the features of blockchain technology. HKMA will continue to proactively explore how eTradeConnect can be connected with overseas platforms.
Moreover, the Open Application Programming Interface (i.e. API Framework) for the banking sector will be launched in four phases this year to foster cooperation between banks and tech firms so that the latter may make use of the data available to develop new services, such as building apps to compare product and service information of different banks and give an overview of one’s financial position by showing his bank account details, thereby bringing new experience of innovative, convenient and safe banking services to customers.
The third area is regulation. In promoting Fintech development, the Government must regulate the market properly to safeguard investors’ interests while vigorously encouraging financial innovation.
HKMA, the Securities and Futures Commission (“SFC”) and the Insurance Authority (“IA”) have each launched their own Fintech platform and sandbox to enhance communication between regulators and the Fintech community and provide tech firms with a platform to conduct pilot trials of their Fintech initiatives, thereby expediting the launch of new technology products and reducing the development cost. More than 40 new technology products have been allowed in the Supervisory Sandbox since its launch. Out of these cases, 28 pilot trials have been completed and the products have been rolled out one after another.
Our financial regulatory regime has also been improved over time. HKMA published a revised Guideline on Authorization of Virtual Banks last year following the completion of a public consultation. HKMA is expected to start granting licences to virtual banks in the first quarter of this year so as to give individuals and enterprises more and better choices of banking services, as well as promoting financial inclusion.
The development of Fintech has also prompted IA to launch a pilot project called “Fast Track” last year to expedite the processing of applications for authorization to carry on insurance business in or from Hong Kong from insurers adopting solely digital distribution channels. IA authorized the first virtual insurer under Fast Track in December last year.
In view of the development of virtual assets in the market and the risks involved, we launched a public education campaign last year on the risks associated with initial coin offerings (“ICOs”) and “cryptocurrencies” to provide the public with a correct and comprehensive understanding of the potential risks of participating in ICOs and “cryptocurrency” transactions. As for regulation, SFC issued a statement last November, setting out a conceptual framework for the potential regulation of virtual asset trading platforms with a view to exploring whether these platforms were suitable for regulation. This regulatory approach, if implemented, can provide a path for compliance for those platform operators capable and willing to adhere to a high level of standards and practices.
The fourth area is the training of Fintech talents. We have been making efforts in different ways to build up a pool of Fintech talents for Hong Kong. In respect of training local talents, six local universities have introduced Fintech-related undergraduate programmes and master’s degree programmes one after another. In addition, self-financing Fintech-related undergraduate programmes have been included in the Study Subsidy Scheme for Designated Professionals/Sectors starting from the 2018-2019 academic year. The Vocational Training Council has also introduced the programme of Higher Diploma in Financial Technology starting from the 2018-2019 academic year. Furthermore, HKMA launched the upgraded version of the Fintech Career Accelerator Scheme last year to provide internship programmes. Since then, more than 270 students have taken part in these programmes.
In terms of on-the-job training, the University of Hong Kong, along with Cyberport and other industry players, launched Asia’s first Fintech Massive Open Online Course (“MOOC”) in 2018. Serving Fintech practitioners can also enrol in the course. In order to assist local practitioners to enhance their ability to utilize innovation and technology, the Government and the trades have provided various training programmes, such as the Pilot Programme to Enhance Talent Training for the Insurance Sector and the Asset and Wealth Management Sector. Trade organizations can apply for subsidies and make training arrangements to enhance their practitioners’ capabilities in utilizing innovation and technology.
In respect of enticing overseas talents, the Government released its first Talent List of Hong Kong (“the List”) in August last year which included Fintech professionals. Eligible persons under the List will be provided with immigration facilitation through the Quality Migrant Admission Scheme, the current annual quota of which is 1 000. In addition, the Government has introduced the Technology Talent Admission Scheme (“the Scheme”) to provide a fast-track arrangement to admit overseas and Mainland research and development talents to Hong Kong. The Scheme will, as a start, be applicable to tenants and incubatees of the Hong Kong Science and Technology Parks Corporation and Cyberport.
Finally, as regards funding, various funding schemes are available to provide support to Fintech companies, including the $2 billion Innovation & Technology Venture Fund launched by the Innovation and Technology Bureau and the Cyberport Macro Fund, etc. Besides, the Cyberport has also established the Cyberport Investors Network (“CIN”) to assist local start-ups to liaise with local and overseas investors in meeting their financing needs at various development stages. At present, more than 100 investors have joined CIN and facilitated Cyberport start-ups to raise more than $200 million.
I will now respond to the proposals raised by individual Members. Regarding Mr CHAN Chun-ying’s proposal of enhancing the rate of utilization of Fintech in our community, as I said earlier, the Government has been promoting the development of Fintech in various ways to promote Fintech inclusion. We also understand that a key to enhancing the rate of utilization of Fintech is to make the public feel confident in using these new technologies. Hence, in promoting Fintech development, the Government will pay special attention to protecting the personal data of the public, so as to avoid leakage of personal data when using these new technologies, resulting in the loss of public confidence in Fintech utilization. I have particularly noted that Mr Charles Peter MOK mentioned in his amendment that there should be an improved regime for personal data and privacy protection. At present, HKMA clearly requires licensed SVF operators to comply with the Personal Data (Privacy) Ordinance and its relevant guidelines, so as to ensure that the personal information of their customers are kept and handled properly. The Office of the Privacy Commissioner for Personal Data has recently comprehensively reviewed the Code of Practice on Consumer Credit Data to ensure that credit reference agencies shall take appropriate measures to protect personal credit data in their daily operations to safeguard against any improper access to personal credit data held by them.
Mr Dennis KWOK mentioned in his amendment that our legislation has to be up-to-date. As I said earlier, each of the financial regulators has reviewed and made adjustments in their regulation of Fintech development. For example, in respect of regulating SVFs, the Payment Systems and Stored Value Facilities Ordinance (Cap. 584) which commenced operation in 2015, provides for a licensing and regulatory regime for SVFs. As at September 2018, there were 51.81 million SVF accounts in use, with the number and value of transactions being around 1.5 billion and $41 billion respectively. These figures show the work and efforts made by the financial regulators.
In respect of the proposal in the amendments of Mr CHAN Kin-por and Mr Charles Peter MOK of assisting in enhancing communication between local technology start-ups and financial institutions, Cyberport has provided a series of measures to match the services of local start-ups and large financial institutions, covering Fintech services which include electronic “know your client” (“eKYC”) utilities, personal and biometric identification, identity verification, artificial intelligence and big data, etc. Cyberport will continue to promote the relevant work.
As regards the proposal in the amendment of Mr Charles Peter MOK of assisting enterprises in enhancing their capabilities in information security, SFC published guidelines on basic requirements for cyber security last year, including two-factor authentication for system login and issued circulars on good industry practices for cyber security and information technology risk management.
Mr WONG Ting-kwong proposed in his amendment of developing eKYC platforms. HKMA has been closely collaborating with the Hong Kong Association of Banks (“HKAB”) to encourage the trades in utilizing “know your client” utilities (“KYCU”) to raise their efficiency of applying customer due diligence measures and enhance the experience of their clients. At present, HKAB has collected information of interested parties and suggestions on KYCU and will decide on its future development after the results of the study are available. As Members have mentioned and according to our understanding, HKAB is mainly concerned with the development of KYCU in small and medium enterprises. When the Innovation and Technology Bureau designed the eID system, it has provided flexibility so that the system can easily support both public and private services, including assisting financial institutions in applying KYC procedures. As a number of Members mentioned the importance of eKYC, we will actively conduct studies on developing a database of personal data in Hong Kong as an infrastructure to encourage and facilitate the development of KYCU, which can also assist the development of Fintech, particularly in start-ups.
Furthermore, Mr WONG Ting-kwong proposed to strengthen the interfacing of cross-boundary mobile payment. The Government and HKMA have been making active efforts in this regard and we have also explored with the relevant Mainland authorities the possibility of using our local electronic wallets on the Mainland. Starting from October last year, WeChat Pay Hong Kong under Tencent Holdings Limited can be used on the Mainland progressively. Other payment operators, such as UnionPay International and Bank of China (Hong Kong) Limited, have introduced mobile payment applications to facilitate mobile payment by Hong Kong people on the Mainland. HKMA will continue to explore with the relevant Mainland authorities on the possibility of a wider application of electronic wallets of Hong Kong on the Mainland.
Mr Christopher CHEUNG mentioned the Technology Voucher Programme (“TVP”) in his amendment. The Innovation and Technology Bureau has kept the operation of TVP under close review and has made enhancement from time to time. For example, in February last year, the eligibility criteria of TVP have been relaxed so as to benefit more local enterprises, including the bigger enterprises and start-ups. The Innovation and Technology Bureau is now conducting a comprehensive review on the effectiveness and modus operandi of TVP, including its funding scope, funding amount and vetting procedures, and based on the results of the review, further enhancement will be made to TVP.
Members have proposed to establish a cross-boundary finance supervisory sandbox. In this regard, Fintech companies of the Mainland and the Greater Bay Area are most welcome to develop their business in Hong Kong and eligible Mainland companies can use the Fintech Supervisory Sandbox introduced by HKMA, SFC and IA to expedite the launch of their new technology products. HKMA, SFC and IA have also established their dedicated Fintech platforms to facilitate communication with industry players of Fintech. If companies of the Mainland and the Greater Bay Area are interested in developing their business in Hong Kong, they can directly contact the regulators through their dedicated Fintech platforms to enquire about regulatory and compliance matters.
Fintech initiatives which are intended to be introduced on the Mainland and in Hong Kong and Macao have to meet all the regulatory requirements of the three places. In response to the development of the Greater Bay Area, we stand ready to communicate further with the regulatory authorities of the Greater Bay Area. We are open to the proposal of increasing exchanges among the Fintech regulatory authorities of Guangdong, Hong Kong and Macao and are willing to discuss issues together.
As regards application of supervisory technology, i.e. Suptech, HKMA considers that Fintech can be used not only in the interface between banks and their clients, but also between banks and their regulators, which will help strengthen the effectiveness of banks in risk management and compliance. Thus, HKMA has extended the scope of the Banking Made Easy initiative to promote the development of Regtech and to establish a Regtech ecosystem in Hong Kong. The scope of the initiative includes applying Suptech on combating money laundering and terrorist financing; implementing prudent risk management and compliance and exploring the possibility of developing machine-readable regulatory requirements. In addition, in respect of Suptech, HKMA will collect more detailed supervisory data and conduct studies on enhancing its supervisory process, etc. with the use of technology, with a view to formulating a holistic plan and implement the proposals progressively.
In respect of SFC, it has established a cross-divisional Market Intelligence Programme and a Data Analytics Group to apply data science technology to analyse internal and external data of the financial markets to further enhance regulatory efficiency. Furthermore, SFC has, on a trial basis, analysed transactions-related data submitted by licensees undergoing reorganization or under inquiry and identified cases of irregularities, monitoring failures and non-compliance, which might otherwise have gone undetected. The results are encouraging, thus SFC is now standardizing the contents and formats of transactions-related data required to be submitted by industry players.
Regarding the problem mentioned by Members that it is difficult to open bank accounts, HKMA considers that the situation has improved through the joint efforts of various parties. HKMA will continue to collaborate with banks, the commercial sector and other relevant parties to address the problem, so that while banks can maintain their system of effectively combating money laundering and terrorist financing, financial inclusion can also be achieved to provide law-abiding enterprises and individuals with access to basic banking services without any unreasonable hindrances.
To further improve the situation, HKMA has also engaged a service provider to conduct on-site inspections by mystery shoppers and it is carefully reviewing the preliminary inspection report submitted by the service provider. Depending on the results of the inspections, HKMA may take appropriate follow-up actions with individual banks. In addition, HKMA is conducting a thematic review on bank account opening by small and medium enterprises to monitor the effectiveness of measures taken by banks to enhance client experience and identify good practices and points to note. HKMA will share these results with the trades. Furthermore, HKMA is actively exploring with the trades on using innovative technologies in opening and maintaining accounts. For example, they are exploring the use of face recognition technology and biometric identification to assist in distant opening of accounts to strengthen the ability of banks in risk management and enhance client experience.
In respect of other proposals and measures mentioned by Members, we will study them with the relevant departments.
Finally, I have to thank Members once again for their views and proposals on promoting Fintech development. We will continue to implement and enhance the support of measures for promoting Fintech development to enable Hong Kong to become an active Fintech hub in Asia and reinforce Hong Kong’s position as a leading financial centre in Asia.
I so submit. Thank you, President.