HKMA's Perspectives on Fintech Development Mr LI Shu-Pui Executive - - PowerPoint PPT Presentation

HKMA's Perspectives on Fintech Development

Mr LI Shu-Pui Executive Director Financial Infrastructure Department Hong Kong Monetary Authority 30 September 2016

Agenda

 Development of Fintech in Hong Kong  HKMA’s Supervisory Approach  Past Initiatives  HKMA Fintech Facilitation Office and New Initiatives

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Development of Fintech in Hong Kong

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 Interest in Fintech development continues to be robust in Asia

 In 2015, Fintech investment in Asia amounted to US$4.3 billion,

accounting for 19% of global Fintech investment

 In Q1 2016, Fintech investment in Asia amounted to US$2.7 billion,

more than 5x compared to the amount in Q1 2015

 The free market environment of Hong Kong is conducive to the

development of Fintech

 48 out of 100 top Fintech companies in the world operate in the city

 Mobile payment and biometric authentication are on the rise

 Paypass, PayWave and ApplePay are getting increasingly popular  Biometric authentication will be adopted by major banks soon Distributed ledger Big Data Analytics Artificial Intelligence

19% 81% 2015 Fintech Investment Asia Other regions

HKMA’s supervisory approach

 Risk-based and technology-neutral

 Development of regulatory framework based on the intrinsic

characteristics of the financial activities or transactions, and the risks arising from them

 No undue exemptions or requirements on the usage of novel

technological applications

 Key success factors for facilitating Fintech development

 Our willingness to learn and understand Fintech  Our ability to maintain close contact with the industry and other key

stakeholders

 Our ability to achieve a good balance between market development

and user protection

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Previous Initiatives

Near field communication e-Cheque

2012 Q3 Commenced NFC study 2013 Q1 Formulated development strategy 2013 Q4 Developed a set of best practices for the development of NFC mobile payment services 2015 Q4 Launched e-Cheque services in HK 2016 Jul Launched the cross border e-Cheque clearing facility with Guangdong Province (including Shenzhen) 2016 Aug Aggregated transaction amount: HK$6.2 billion Aggregated number of e-cheques issued: 191,300

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Previous Initiatives (con’t)

Stored value facilities (SVF)

2015 Q4 Passed the Payment Systems and Stored Value Facilities Ordinance (PSSVFO) to provide a regulatory framework for payment services including Fintech products Prospective applicants profile: Background: 55% Local; 25% Mainland; 20% Overseas Products or Services: 33% Internet/mobile payment businesses; 66% prepaid cards issuance businesses Current status: 70% existing local SVFs operators; 30% new market entrants 2016 Q3 5 SVF licences issued: Alipay Financial Services (HK) Limited; HKT Payment Limited; Money Data Limited; TNG(Asia) Limited; Octopus Cards Limited More will be issued later 2016 Q4 The 1-year transition period under the PSSVFO will end

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Fintech Facilitation Office (FFO)

 Facilitate the healthy development of

fintech:

 Support the sustainable development of the

Fintech industry in Hong Kong

 Promote Hong Kong as a Fintech hub in Asia

 Protect fintech consumers

 Keep the public confident in Fintech services

and the banking system Distributed ledger (Blockchain) Big data analytics Artificial intelligence (machine learning) Payment and financing

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Functions of Fintech Facilitation Office (FFO) FFO

Research and application

an initiator of industry research in potential application and risks of Fintech solutions

Regulatory interface

an interface between market participants and regulators within the HKMA

Industry Liaison

a platform for exchanging ideas of innovative Fintech initiatives among key stakeholders

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 Cyber Risk Assessment Framework  Cyber Threat Intelligence Platform  Professional Development Programme

Goals:

 Adopting a more comprehensive approach for looking at cyber risks  Providing a more structured framework for assessing cyber resilience  Providing more focused training for cybersecurity professionals

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Initiative 1 – Cybersecurity Fortification Initiative (CFI)

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Initiative 1 – Cybersecurity Fortification Initiative (CFI)

• As part of the CFI, a new piece of infrastructure namely the Cyber Threat

Intelligence Platform will be developed to allow sharing of cyber threat intelligence among banks in order to enhance collaboration and uplift cyber resilience

• We are happy to consider ideas for possible collaboration with other

central banks or regulators on cyber intelligence sharing

 A neutral ground where industry-wide Fintech solutions can be developed  Users: HKMA, banks, SVF issuers and Fintech solution developers  Major functions:

Training sessions Regtech Banking industry solutions Computing resources

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Holding dialogues

Initiative 2 – HKMA-ASTRI Fintech Innovation Hub

 With real-life data and user feedback obtained, banks can refine their initiatives

 Better meet customers’ needs  Reduce the risks for formal launch

 Speed up the rollout of initiatives and reduce the cost incurred

Benefits

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Initiative 3 – Fintech Supervisory Sandbox ~ by Banking Supervision Department

Features:

 Pilot trials without the need to achieve full

compliance with supervisory requirements

 A one year project, partner with research institute (ASTRI), banking industry

and IT industry

• 1. What is distributed ledger technology?
• 2. Potential applications in the financial industry
• 3. Regulatory implication

Distributed Ledger

1) mortgage loan application 2) trade finance 3) digital ID management

FFO’s main function: Research & application

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FFO’s main function: Industry liaison

 Partners:  A series of events:

Time Event Participants Jun 2016 Fintech O-2-O Meetup (the first Fintech industry gathering on the topic of cybersecurity) 200 people from Fintech-related sectors Jul 2016 An international conference on the risks and

• pportunities of adopting Fintech solutions

170 people, including global and regional regulators Aug 2016 The first “needs-driven” event in which 10 Fintech companies presented their solutions to address the needs of a major bank in Hong Kong 90 people, including around 70 representatives from a major bank in Hong Kong

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 An interface between market participants and regulators  Through regular dialogue with the industry, FFO explains HKMA’s promotional

and supervisory work relating to Fintech development

FFO’s main function: Regulatory interface

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Thank You

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