Wealthtech, or technology related to the wealth management industry, is comprised of data analytics, automation and artificial intelligence (AI), according to a fintech report released by the FSDC yesterday.
Wealthtech has significant growth potential in the areas of AI and robo-advisories, the report noted.
Although many financial institutions in the SAR already offer self-service platforms to the customers, “[in] Hong Kong advice is generally bundled with a human adviser. This increases cost, and exposes the customer to the risk of error and fraud”, it noted.
AI and automation can be applied to areas at the operational level, such as platform provisioning and product tailoring, to client servicing, including the offering of investment themes and advice, and to the execution part, which is algorithm-based trading, the report said.
Areas needing attention
Other key areas the FSDC emphasised Hong Kong needs to address are cybersecurity, payments and securities settlement, digital identity and know-your-customer (KYC) utility, and regulatory technology (regtech). It also published a report on distributed ledger technology (DLT) such as blockchain.
“Hong Kong has a world-class financial sector, but only a nascent fintech and DLT sector,” said chairman Laura Cha in a statement. “As the global fintech and DLT ecology is maturing, Hong Kong needs to catch up in the race.
“Hong Kong is very strong in ‘fin’, but not strong in ‘tech’,” the report noted.
To address the issue, the council suggested the territory to focus on three opportunities: “Hong Kong can act as a landing pad for fintech [companies] eyeing regional opportunities, as a market for fintech providing business-to-business (B2B) services, and as a launch pad for mainland fintech seeking international expansion.”
For the development of the digital ID and KYC utility, FSDC suggested establishing a standardised database.
“[E]ach participating Hong Kong individual and corporate customer would have a digital profile comprising identity, preferences and transaction history,” it explained.
The application is set up to tackle issues faced by financial institutions on verifying customer identity and ascertaining suitability and preferences when accepting new clients or conduct ongoing KYC, it added.
The FSDC also proposed that the government create a fintech office, following Singapore’s example. “At present, fintech matters in Hong Kong are handled by the three financial regulators as well as by various other institutions and government departments.
“However, there are opportunities for greater coordination among these institutions, and for avoidance of duplication or conflicting approaches to common issues,” it noted.
