While the Hong Kong Monetary Authority (HKMA) supports technology and innovation, the regulator wants to see a healthy balance between convenience and investor protection, according to the watchdog’s CEO, Norman Chan.
Chan said in a note on the HKMA’s website on Wednesday that irrespective of the technologies adopted by banks, institutions need to ensure that the “fundamental element of banking remains the same” – in other words, the need to protect clients’ deposits “and their interests in financial transactions”.
“The question is how to make sure that the convenience offered by fintech will not lead customers into making hasty decisions that may result in a material loss when investment products are sold with the use of fintech,” he said.
The industry also needs to ensure that investors understand the terms and conditions and the risks involved when complex or risky financial products are bought online.
“These questions show that there is a need to strike a reasonable balance between convenience and investor protection.”
Hong Kong’s Securities and Futures Commission (SFC) is attempting to address these issues, having published a consultation paper on the proposed guidelines on online distribution and advisory platforms.
Clifford Chance consultant Helen Fok told Asian Private Banker last month that the “requirements are somewhat difficult to achieve”.
Meanwhile, Chan said that “when our society demands protection, the government is obliged to regulate”, adding that fintech is allowing customers to enjoy more efficient and convenient financial services.
“What I want to stress is that under the risk-based principle, the HKMA supports and embraces technology and innovation as it brings greater convenience, efficiency and security for the public,” he said.
The HKMA’s recent initiatives to promote fintech development include the establishment of a Fintech Facilitation Office and the launch of the Fintech Supervisory Sandbox for banks.
Meanwhile, Chan believes that while the ‘techfin’ (technology firms entering the financial services sector) market in Mainland China is ballooning, traditional financial institutions will be “hard to replace” altogether.