FinovateAsia Focuses on Impact of Challenger Banks, Digital Banking, Regtech, plus its Face-Paced Live Demos
Hong Kong Fintech Week, organised by Invest Hong Kong (InvestHK), kicked off today with FinovateAsia 2018, a two-day conference comprising industry expert and regulator speeches, along with its signature seven-minute live demos. The audience heard about the transformation of the banking sector, dinosaurs and what to watch out for in 2019.
Greg Palmer, Vice President of Strategy at Finovate, launched the event with a welcome speech, which is followed by a keynote by Chris Skinner, Chairman of the Financial Services Club, on the impact of data and challenger banks on the financial services industry.
“We’re finally seeing the transformation of the banking sector,” said Mr. Skinner, citing the emergence of companies such as Stripe, PayPal and Ant Financial. He said that some traditional banks are becoming more like digital banks. “The digital structure means people are not needed; banks are getting rid of buildings and people,” he said, adding that around 50% of current banking jobs will disappear by 2025.
He quoted a fintech executive who said: “My three-year old likes to play with dinosaurs… so do we!” Banks with their legacy systems, vendors and people – notably at board level – being the dinosaurs.
Mr. Skinner continued: “teenagers are creating the future of financial services technology because they can code.” He said all aspects of financial services are being broken up into their component parts and put into code by start-ups. It’s very specialist code and it’s disrupting the traditional banks.
Hong Kong-Macau-Zhuhai Bridge highlighted
Mr. Skinner’s speech was followed by Bernard Chan Pak-li, Acting Secretary for Commerce and Economic Development. Representing the Hong Kong government and regulators, Mr. Chan reiterated Hong Kong’s proposition as a centre that’s a very open economy with a free flow of capital, rule of law and a regulatory regime that’s aligned and fair.
Meanwhile, Mr. Chan said the new Hong Kong-Macau-Zhuhai bridge reflects the city’s strategically important location as it ties in more closely with the Greater Bay Area. He added that the world’s largest offshore pool of renminbi funds is in Hong Kong. “It is the leading offshore hub for renminbi business,” he said.
During the morning, the audience heard two 10-minute presentations by well-known global fintech analysts, Frederic Giron, Vice President, Research Director, Forrester, and David Bannister, Principal Analyst, Ovum. It also featured two fast-paced demo sessions where in total 25 innovators from around the world gave seven minute presentations.
Mr. Giron said, while giving predictions for 2019, that the world is due for a financial crisis or recession. He added that banks which have been digitalising and adapting in recent years will be more resilient to such events. He said the pressures caused by high levels of borrowing and debt will put greater focus on ROI and fuel bank caution.
Mr. Giron talked about four key areas of digital development for banks: experience, operations, innovation and ecosystem. He said that challenger banks, such as N26, Revolut and NUbank, are set to take millions of customers from traditional banks in the coming years. One consequence of the digitalisation will be to make robots the fastest growing employee group, he said.
Mr. Giron said some fintech investment has not yielded the desired returns. “Just 23% of firms have got value out of digital innovation labs,” he said. “It means that some will be repurposed.”
Mr. Bannister noted that it’s the customer that’s driving technological change at banks and highlighted two key areas of change: open banking and real-time payments.
Awareness in Asia of the value of APIs has risen to 88%, up from 64% last year and above 82% globally, he said. His research showed that 85% of banks’ corporate customers have considered moving bank in the last year, reflecting a desire for better, easier service and the potential to win new business for those banks which get it right.
The afternoon saw several breakout panel sessions, including one on Payments Innovation.
“The industry will go through consolidation and differentiation,” said Ryan Kim, Head of Digital Banking and Alliances at Standard Chartered Bank. “Customer stickiness and collaboration are the key to payment innovation in the future – we are seeing more collaboration, including the sharing of data between fintech or payment companies with banks in every market.”
Lawrence Li, Business Development Director of TNG Wallet, commented: “The first step to create customer stickiness is to localise the product. Localisation is the future trend of the payments industry. Collaboration is important too, especially the cross-border collaboration which would help to bring in more players to the industry, thereby creating diversification.”
Before the panel discussion, Venetia Lee, General Manager Hong Kong, Taiwan & Macau at Alipay, said how Alipay has invested in a biometric recognition application. Alipay has launched a system called “Smile to Pay” at KFC which only requires a user’s face to make the payment, making it a safe and convenient payment option.
Open Banking and APIs
A separate panel session on Open Banking & the API Economy started with a presentation by Dr. Louise Beaumont, Co-Chair at Open Bank Working Group. She said the four drivers of change in banking are consumer attitudes, including behavior and expectations, along with technology, competition and regulation.
Using HSBC and Amazon for comparison – Amazon being a tech titan that has moved into financial services – she said their boards were similar in most ways, except in education, work experience and perceived attitude to risk. In these three, the Amazon board had far greater diversity. She noted also that another factor holding back traditional banks are their shareholders. “Bank shareholders want a dividend,” which constrains, she said. “Tech titan shareholders need growth.”
Off-the-record with the regulators
During the late afternoon in the main auditorium, regulators gathered on stage for an off-the-record (Chatham House Rule) panel session.
Commenting on regtech, one panelist stressed it should be used to rationalise reporting and not simply to add more layers to it. It was pointed out that, according to Thomson Reuters, on average there are 18 regulatory changes a day worldwide in the financial services sector.
“It’s very difficult to deal with that. A lot of the reporting is duplicated or similar. Who is reporting what to whom is the first bit of the process,” said a panellist, with reference to how best to start simplifying the regulatory process. “A wholesale rethink of how financial services firms are being regulated is needed…how to regulate firms globally. Right now, regulatory harmonization is too difficult, so nothing has happened.”
Some common threads do exist however. All agreed on the need for regulations to protect the consumer and that regulation helps the development of the sector. “There are different economies, different situations, different objectives – and different regulators seek different things: stability, competition and innovation.”
HKU Fintech Day
Away from the main Fintech Week venue, at the University of Hong Kong (HKU) the Law, Innovation, Technology and Entrepreneurship (LITE) Lab had a soft launch. This is a new interdisciplinary and experiential programme spearheaded by the HKU Faculty of Law. The launch was part of HKU Fintech Day 2018, in conjunction with Hong Kong Fintech Week.
The programme is headed by founding executive director Brian Tang, a corporate financier and innovator who has worked in New York and Silicon Valley. He is also co-chair of the Fintech Association of Hong Kong RegTech Committee and one of the six instructors for Asia’s first fintech MOOC led by HKU that has more than 30,000 learners worldwide.
At HKU Fintech Day, LITE Lab@HKU hosted a panel comprising global leaders from WeBank, China’s first online-only bank, Tinkoff Bank, the world’s largest independent digital bank from Russia, and TNG, Hong Kong’s own fintech unicorn-to-be, to share their journeys and lessons on regtech as the secret sauce for effective digital banking and finance.
HKU also announced initiatives relating to two more Fintech-related MOOCs, both of which will start in 2019 – on Fintech Ethics & Risks and Blockchain & Fintech – plus a new Bachelor of Arts and Science in Financial Technology (Fintech).
Fintech and Beyond
The Fintech Forum, organised by AMTD FinTech Centre of PolyU Faculty of Business and co-organised by AMTD and The University of Waterloo Innovation Lab, brought in leading academic researchers and industrial professionals to share their expert knowledge and experience on big data, blockchain, IoT, smart city and fintech education and related innovation.
The morning session started with a tour of the AMTD Innovation Lab. Victor Lam, JP, Government Chief Information Officer, Office of the Government Chief Information Officer gave opening remarks, after which the audience heard research experts share independent perspectives on Hong Kong’s overall fintech landscape, along with developments in the local ecosystem, the Greater Bay Area and across the globe. The event closed with a keynote from Soul HTITE, Co-founder of Lending Club and Dianrong.