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Three-pronged Strategy to Foster FinTech Development

Today marks the opening of the sixth edition of the Hong Kong FinTech Week, an annual flagship event for Hong Kong’s financial industry. Themed “Scaling FinTech Future Together”, the event, in both physical and virtual forms, brings together representatives of governments, regulators and the industry to explore how innovative thinking and emerging technologies can power financial services. When attending the event for the first time as the Secretary for Financial Services and the Treasury last year, I chose to host a fireside chat with an industry representative instead of addressing the participants in the traditional way. I did the same this year by inviting Mr ZHANG Lei, the Chairman and Chief Executive Officer of the Hillhouse Group, to join a fireside chat. During the chat, I talked about the three key areas in which the Financial Services and the Treasury Bureau (“FSTB”) would foster the development of FinTech in Hong Kong, namely 1) Opening up of Data; 2) Policy Co-ordination; and 3) Skill Enhancement. I wish to share with you our Three-pronged strategy as follows.

1. Opening up government data and introducing a shared platform: Data are precious assets in a new era where financial development is driven by technology. Data, if appropriately used, can substantially reduce the operating cost of financial activities, bringing actual benefits to all participants including capital providers, intermediaries and borrowers. In this regard, the Chief Executive mentioned in her Policy Address this year that the Hong Kong Monetary Authority would develop the Commercial Data Interchange (“CDI”), through which enterprises could authorise service providers such as payment systems, public bodies or utility companies to furnish banks with data. Banks can then make more accurate predictions about the sales and operation of enterprises, thereby reducing the need for enterprises to provide collateral.

Opening up of government data and the sharing of such data with financial institutions play a crucial part in the development of the CDI. Government data are inherently different from the data held by private enterprises. Very often, government data have to be collected and collated in accordance with certain laws or codes, and are hence widely recognised and credible. With adequate protection of privacy and authorisation by enterprises, opening up government data for use by financial institutions will effectively reduce the uncertainties and the cost involved in the credit approval process, thus facilitating loan financing for enterprises. Used in conjunction with other business data and operating records that facilitate the credit approval process, banks can make more accurate predictions about the sales performance of enterprises, thus may not require the provision of collateral. If enterprises operate well and outperform the projected sales volume, credit facilities may be automatically increased as well.

We are now considering the sharing of data in the Companies Register to the CDI, to make it more convenient for financial institutions to obtain reliable information on registered companies. As there are, at present, nearly 1.38 million local companies in the Companies Register, it is a vast and frequently used database, and through the CDI its data can be more conveniently shared with the industry. Specifically, we will explore the use of Application Programming Interface (“API”) to enable the interflow of data across systems, such that financial institutions, after being duly authorised by the enterprises concerned, can obtain information of registered companies in a safe and convenient way. In order to take forward the strategy of opening up government data in a more holistic manner, the Office of the Government Chief Information Officer will also explore the development of a standardised API to enable sharing of data by more government departments through the CDI, thereby building it into a new financial infrastructure in Hong Kong.

2. Establish and chair the Coordination Group on Implementation of Fintech Initiatives “CGFin”: In the past when the development of FinTech was still in an infancy stage, the Government established a supervisory group chaired by the Secretary for Financial Services and the Treasury, to submit recommendations on development of FinTech in Hong Kong to the Government. Subsequently, the Government has been acting on the recommendations received, through the enhancements of financial infrastructures, regulatory and market environment, nurturing of talent, strengthening of cooperation on FinTech adoption and cross-boundary application with Mainland and overseas markets, and promotion of Hong Kong’s advantages, to develop our FinTech industry.

Now it is clear that we have entered a new stage of development, and the sector is evolving rapidly with a more competitive international landscape. Also, the integration of technology and finance has introduced new dynamics, on the one hand FinTech solutions brought us new business models and enhanced efficiency, on the other hand new challenges have emerged for policy making and regulations. To strike a better balance between market development and regulation, I have decided to establish and chair a Coordination Group on Implementation of Fintech Initiatives “CGFin”. This group will holistically review and supervise the development of FinTech in Hong Kong, covering the areas of Mainland and overseas cooperation, financial infrastructures, regulatory regimes, cybersecurity, promotion, talent development and other cross-sectoral FinTech coordination. We will also invite industry representatives, investment institutions and scholars to brief the group on latest industry trends when needed, with a view to ensuring our policy and regulations are proactive enough to promote the further development of FinTech in Hong Kong.

3. Launch of Financial Practitioners FinTech Training Programme: To promote better understanding and encourage more application of FinTech by the financial services industry, FSTB will once again commission Cyberport to launch a training programme for our practitioners this year. Besides nominated staff from financial institutions regulated by HKMA, SFC, IA and MPFA, eligible participants will be expanded to cover other relevant organisations, such that more participants can join the programme, and learn from the sharing of guest speakers having practical experiences and knowledge in the latest development of RegTech, KYC, Blockchain and cybersecurity etc. We expect the training programme will benefit up to 1,500 practitioners, and promote more application of FinTech in the industry.

Through this Three-pronged strategy, we hope to facilitate the development of our FinTech industry by 1) Opening up of Data; 2) Policy Co-ordination; and 3) Skill Enhancement. We are confident that the strategy will hit the bull’s eye, and together with the industry we will make the best use out of the opportunities offered by FinTech.

3 November 2021