Hong Kong Announces Four Bold Initiatives To Successfully Charter The Future Of Fintech

Last week, the 5th Hong Kong fintech week took place virtually for the first time due to COVID-19. In the opening keynote, Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue highlighted what the new era of fintech will look like after the events of 2020, and introduced a new host of initiatives centered around bank data exchange, CBDC research, trade finance digitization, and RegTech.

Yue announced that HKMA will be exploring a new data strategy and will consider building a new financial infrastructure called the Commercial Data Interchange (CDI). Aimed at using data to facilitate SME financing, the CDI will encourage more efficient financial intermediation in the banking system, enhancing financial inclusion in Hong Kong.

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With the potential of solving long-standing pain points in SME financing, the CDI will be a consent-based financial infrastructure under which secure and effective data can stream between banks and sources of commercial data. SMEs will be able to use their own data to enhance access to financial services.

Before going to market, the CDI will be tested rigorously for feasibility with the HKMA conducting a Proof-of-Concept (PoC) study collaboratively with banks. The Hong Kong Applied Science and Technology Research Institute (ASTRI) has been commissioned to create the related technology for credit scoring. With the CDI, banks will be able to perform more precise and objective credit assessments.

In order to provide importers and exporters with more convenient trade finance services, the HKMA has undergone conducting a PoC to explore connecting the two platforms of eTradeConnect and the People’s Bank of China Trade Finance. In the keynote, Yue announced that phase 1 of this testing was completed with seven banks already successfully using the connection to conduct trade financing transactions with a total trade value of over HK $26 million. Phase 2 of the PoC has been loosely slated for early 2021 and will cover further trade activities and financing products.

Yue also shared that Project Inthanon-LionRock, the joint study on the application of CBDC to cross-border payments conducted by the HKMA and Bank of Thailand has entered phase 2. In the latest phase, both authorities will explore business use cases in cross-border trade settlement and capital market transactions. So far, 19 banks and five corporates will be participating alongside Hong Kong Exchanges and Clearing Limited. With cross-border corridor network prototype to be elevated to support CBDCs and other banks in the regions, banks and corporates will soon be included in trials with actual trades. The findings will likely be shared in Q1 2021.

Lastly, Yue shared a two-year roadmap by the HKMA aimed at promoting Regtech adoption in the Hong Kong banking sectors. This strategy signals the HKMA’s recognition of Regtech’s increasing significance in the region.

With every initiative clearly detailed, it is evident that Hong Kong is firmly chartering a course to pave the way for financial technology to continue to soar in the region.