As the focus intensifies on the use of financial technology in the investment industry, the Hong Kong Monetary Authority has for the first time publicly set out its stance about this area, revealing certain concerns.
Arthur Yuen, deputy chief executive of the banking watchdog, explained the principles HKMA follows when regulating emerging fintech, suggesting it takes a relatively laissez-faire approach.
Speaking at the Hong Kong Institute of Bankers’ conference on Friday, Yuen voiced support for the benefits of fintech, arguing that it will empower customers and intensify competition in financial services. And he rejected suggestions that HKMA’s conservative regulations had hindered fintech development in the city.
Yuen said the watchdog has moved away from being too focused on customer security to strike a better balance between ensuring protection and providing convenience in using technologies.
“The same customer protection requirement will more or less remain relevant regardless of the channel used to deliver it,” he noted.
In response to the criticism that Hong Kong lacks suitable rules on fintech, Yuen said: “People have the impression that regulation is needed for fintech to flourish. That’s wrong. Fintech will flourish with our without regulation. The whole premise of fintech is not to be regulated, so I think that criticism is completely misplaced."
Such comments would appear to have been sparked by suggestions that Hong Kong's regional rivals are more likely to create successful fintech industries as they have lighter-touch regulation on this front.
Yuen pointed to a “misconception” that the regulator has a long list of do’s and don’ts for banks with regard to technology usage. That is not the case for traditional banking, he noted, and nor will it be the case for new distribution channels for financial services.
“We want to be technology-neutral,” he said, adding that HKMA wants to give banks the freedom to use the technology they want, while retaining its focus on investor protection.
Asked what worried HKMA the most about fintech development, Yuen expressed concern about the potential for new industry entrants to steal a march on existing players.
“Banks are still fairly successful in using technology themselves and providing services to customers,” he noted. “But there is no guarantee that will continue to be the case.
“So if new start-ups or entrants come and dis-intermediate the incumbent firms, how do we address the potential impact on customers?” Yuen asked. “Do we have a sufficient and robust framework to deal with it and do we have a sufficiently sophisticated public that understands the risks?"
Ultimately, Hong Kong is making steady progress in fintech development, Yuen said. He cited as an example revised guidance on e-banking issued on September 2, saying it provided more flexibility for a range of new e-banking services such as small-value payments (or peer-to-peer payments), more transactions via mobile devices and internet banking via social media.