Hong Kong’s Banks To Harness Technology And Data To Compete With Virtual Banks And Improve Regulatory Compliance, Finds KPMG 2019 Outlook

Hong Kong, 10 December 2018 – KPMG’s Hong Kong Banking Outlook 2019 notes that while the sector is more resilient due to the strengthening of regulations over the past decade, the level of change, disruption and competition in the industry over the next few years will raise new challenges for banks. This is emphasised by the expected launch of the first virtual banks in Hong Kong in 2019, which will disrupt traditional business models and how customer experience is delivered in the city.

Paul McSheaffrey, Partner, Head of Banking & Capital Markets, Hong Kong, KPMG China, says: “Traditional banks will use the year ahead to invest in new technology and upgrade their digital platforms to effectively compete with the new market entrants. However, to be truly successful, they need to ensure they are focusing on the customer experience.”

The report states that the successful banks in the coming years will be the ones that truly put their customers front and centre of their business strategy, and harness the power of data to achieve this. Technology will be a key enabler for banks to realise value from their data and become more customer-centric, as well as to improve how they deal with regulation and compliance issues.

The publication adds that while regulation will continue to be a key driver of change in Hong Kong’s banking sector, there is expected to be less prudential regulation and a greater focus on conduct, and how banks treat their customers.

“Investing in data and technology to build up management information will make a demonstrable difference to improving a bank’s management of conduct risk,” says McSheaffrey.

“While much of this information has traditionally centred around lagging indicators, we expect more banks to identify and define leading behavioural indicators such as trading patterns, sales spikes and certain complaint trends. The development of these leading indicators will require enhanced processes and solutions to improve the availability, collection and analysis of quality data.”

The report highlights a number of opportunities for banks to grow and succeed by embracing fintech, artificial intelligence, blockchain and data analytics, as well as through the Hong Kong Monetary Authority’s Smart Banking Initiatives, including the Faster Payment System and the Open Application Programming Interface Framework.

It also notes that while leading banks will leverage emerging technology and become data-driven enterprises, this also increases risks and the impact around data protection and cybersecurity. Banks are therefore expected to rethink their approach in 2019 and embed cybersecurity into the core of their digital and overall business strategy.

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