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Capturing cross-border financial business opportunities
In the past year, the COVID-19 epidemic has troubled Hong Kong and the world, but it has also brought unprecedented business opportunities to the financial technology (FinTech).
For example, the Faster Payment System (FPS) has recorded an amazing growth in 2020. In last October, an average of 452,000 real-time transactions were processed every day, which was twice that of the end of the previous year, involving HK$4.4 billion and RMB44 million. Statista, a business data website, estimates that in 2020, nearly 70% of Hong Kong people have used online shopping.
Hong Kong's financial technology business has flourished substantially, however, if it can expand to the Greater Bay Area (GBA), it will have an even more promising future.
According to the June 2020 report released by the Financial Services Development Council, there is increasing integration within GBA, as residents frequently travel within the region for schooling, employment, tourism, visiting relatives, business and more. However, the current supporting facilities are not good enough for the changing situations, so there are great business opportunities.
We can see the opportunities of providing GBA residents with "real-time, stable, low-cost and efficient" banking transfer, insurance products and services covering the entire GBA, as well as convenience for Hong Kong residents to open mainland bank accounts and use mainland properties as security for cross-border mortgage loans, and more. The report also quotes the Hurun Wealth Report 2019, stating that there are a total of one million "wealthy families" with assets of RMB6 million and "high-net-worth families" with assets of RMB10 million in Guangdong Province. Even under the impact of the epidemic in 2020, the number of these families did not drop too much, and remains the second largest in the country. They are mainly located in Shenzhen, Guangzhou and Foshan. These wealthy people have great demand for wealth management.
However, Hong Kong is yet to realise business opportunities for the time being, mainly due to the difference in system, regulation, and culture between Hong Kong and the mainland. This is also a common problem internationally. That is the reason why a supervisory sandbox has been proposed to allow financial regulators to explore the possibility of cross-border finance under controlled conditions. For example, in 2018, the Financial Conduct Authority (FCA) in the United Kingdom initiated a global sandbox to allow innovative financial products to be tested internationally.
However, carrying out transnational services is full of challenges. Our FPS is an example, despite its efficiency, it is still limited to local use. Cross-border payments remain characterized by low efficiency, high cost, and lack of transparency, making it difficult for us to "make real-time, cross-border payments in the blink of an eye regardless of where we are", as mentioned in a blog of Eddie Yue, chief executive of the Hong Kong Monetary Authority (HKMA).
Therefore, I am glad that the HKMA has made much progress on cross-border payments recently. In addition to a joint research project with the Bank of Thailand on how to use the central bank's digital currencies and blockchain platform to solve various issues in cross-border payments, it is also committed to extend FPS as payment tools in popular tourist hotspots for Hong Kong people. It also works with the Digital Currency Institute of the People's Bank of China to study the use of e-CNY, the digital renminbi for cross-border payments, offering another option for future retail consumer payments in the mainland and Hong Kong.
As an international financial centre, Hong Kong has made some progress in FinTech in recent years. To reinforce our position as Asia's FinTech centre, collaboration between the government, private and public organizations and the general public is indispensible. It is also the key to succeed as a smart city.
Dr. Winnie Tang
Adjunct Professor, Department of Computer Science, Faculty of Engineering; Department of Geography, Faculty of Social Sciences; and Faculty of Architecture, The University of Hong Kong