Hong Kong: A Banking Innovator to Rival Singapore
Hong Kong and Singapore continue to innovate and compete
Hong Kong’s Banks are “laying the groundwork for the future of banking,” and if you look carefully at what they’re doing, it is every bit as innovative as that in their neighbor and competitor, Singapore!
Most importantly, what isn’t happening is that Hong Kong isn’t dead or dying as reported by some irresponsible journalists in the West.
It remains a vibrant innovation center for finance and contributes significantly to Asia leading the fintech revolution.
With everything from fully digital (virtual) banks, active tokenization programs, licensing for cryptocurrencies, and the creation of a CBDC, Hong Kong is aggressively ensuring its future.
This report contains the financial results for all of the city's banks, which saw “moderate growth” in 2023. The focus of my takeaways below is on innovation.
👉TAKEAWAYS (innovation-focused)
🔹 Fintech solutions: The HKMA's Fintech 2025 strategy is an important driver of the city's efforts to future-proof the financial sector. Launched in 2021, its focus areas are: encouraging all banks go fintech, creating new data infrastructure, expanding the fintech workforce and preparing for Central Bank Digital Currencies (CBDCs)
🔹 Technology and talent: Fintech 2025 also promotes greater adoption of emerging technologies, particularly artificial intelligence (AI) and distributed ledger technology (DLT). Areas where challenges have emerged include the integration of new AI-based solutions with banks' legacy systems and a lack of technical expertise among staff.
🔹 GenAI: The reality of a bank's data readiness coupled with still fairly murky business cases that have a clear ROl, as well as the need to fully understand the potential risks engrained in GenAl use - particularly where there is direct client impact - means that true adoption and productivity gains from GenAl will likely be a story of 2025 and beyond.
🔹 CBDC Projects: “Future-proofing Hong Kong”
➣ MBridge: The bold offering HKMA the BIS and solves the problem of cross-border CBDC transfers and represents a move away from SWIFT!
➣ Project Ensemble: Investigate the infrastructure needed to enable interbank settlement of tokenized money through a wholesale CBDC.
➣ Retail CBDC e-HKD: Hong Kong is now on phase 2 of the e-HKD program and will cover payments, programmable payments, offline payments, tokenized deposits and settlement of web 3 transactions.
🔹 ESG and climate change: Hong Kong recently issued a taxonomy for sustainable finance, which will facilitate the greater adoption of ESG-related products, and also plans to develop a sustainability disclosure ecosystem.
Hong Kong’s virtual banks are all losing money! This should come as a surprise,, given the losses of neo banks in the West. I don’t expect all to survive, given the small local market. Still, the top two performers, Mox and ZA Bank, have accumulated significant assets even when compared to traditional institutions.
👊STRAIGHT TALK👊
The rivalry for fintech supremacy between Hong Kong and Singapore will never end!
I think Singapore is winning the battle, but has a long way to go before it wins the war!
Here’s the irony! We should all hope this rivalry continues for many years as the two cities are pushing fintech forward for Asia and the world!
The longer they compete, the more innovations we’ll get!
Hong Kong is vibrant, and if this post does anything, I hope it will dissuade you from believing that it is dead post-COVID.
I’ve read this absurd claim too many times, and it makes no sense, considering it is attached to China, the world’s largest exporter and second-largest economy.
What do you think?
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