Key highlights and insights from Hong Kong FinTech Week 2023

Co-organised by the Hong Kong Financial Services and the Treasury Bureau and InvestHK, HKFTW 2023 maintained its eight-year streak of gathering over 30,000 global thinkers and leaders at the crossroads of innovation, technology, and finance.

At Hong Kong’s international FinTech hub, HKFTW served as a melting pot of ideas, fostering meaningful conversations and collaborations.

Key trends and announcements

HKFTW’s theme this year was “FinTech redefined”, which resonated throughout the event’s keynotes, panel discussions, and networking sessions.

The Main Conference was held from 2 to 3 November at the Hong Kong Convention and Exhibition Centre, with keynotes and panel discussions showcasing numerous variations on the theme, including pioneering technologies like AI and Web3; sustainable and green finance; and business opportunities in the Greater Bay Area.

Zühlke supported HKFTW as a FinTech Partner this year in driving innovation and transformation in the financial services industry, engaging in discussions on the developing financial ecosystem, including topics on AI, web3, tokenisation, and blockchain.
 

Tokenisation: Platforms vs. compliance

Tokenisation emerged as a key topic of discussion – it is a key enabler of Web3, converting assets like commercial money or art into digital assets which can be managed through blockchain technology without the need for a central intermediary.

Many banking thought leaders at the HKFTW recognised that, at the moment, FinTech has outpaced the regulation that governs it.

Hong Kong’s Financial Services and the Treasury Bureau (FSTB) also announced a three-pronged strategy for FinTech development, involving the opening up of government data and wider adoption of emerging technology. Additionally, the Securities and Futures Commission (SFC) issued circulars on tokenised securities, allowing retail access under specific conditions, including prior notification and business plan discussions with the Commission, as well as mandatory smart contract audits.

“The key to establishing a digital asset platform lies not only in technology but also in regulatory compliance,” explained John O’Neill, HSBC’s Managing Director and Head of Digital Assets, at a panel discussion. “It’s really about marrying technology, law, and regulation together.”

​​In the ever-evolving digital asset landscape, organisations must operate with a keen eye on regulation. Even as they innovate, they must also align with a complex collection of governance frameworks, ensuring that their technology initiatives go hand in hand with compliance and ethical responsibility. 

“It's not just about pioneering in the digital frontier; it's about doing so within the boundaries of regulatory frameworks that safeguard the integrity of the financial ecosystem,” says Johnny Leung, Head of Business (Hong Kong), Zühlke.

Blockchain: A pivotal shift in new use cases

As the key enabler of tokenisation, blockchain has also been the subject of increasing interest from FinTech practitioners. Blockchain’s decentralised nature and immutable record-keeping ensures the integrity and traceability of digital assets, while fostering transparency and trust in the tokenisation process.

“I believe that the pace of blockchain innovation, especially tokenisation, will accelerate even further,” explained Eddie Yue, CEO of the Hong Kong Monetary Authority (HKMA), noting that Hong Kong’s innovative legal and regulatory environment encouraged new blockchain-based use cases like tokenised bonds. “We will witness an increased adoption of blockchain-based payment methods, including stablecoins and tokenised deposits.”

Digital assets and tokenisation open a new realm of possibilities, fostering a more inclusive and efficient financial ecosystem. While this digital shift underscores Hong Kong's commitment to being at the forefront of financial technology, there are challenges to be met head-on, including the need for clearer regulatory and legal frameworks, as well as the importance of talent development and education.

Regulation: New technology, new risks, new rules

Hong Kong’s regulators made a strong pitch for revised regulatory and legal frameworks that can catch up with technological advancements like Web3.

“While we are supportive of the industry experimenting, making more of these use cases, we also see new risks… particularly in the transfer, ownership and record-keeping of these tokens,” explained Julia Leung, CEO of the SFC.

On the same day, the SFC released two circulars outlining requirements for tokenised securities: one providing guidance to intermediaries engaging in tokenised securities-related activities, and another governing the tokenisation of SFC-authorised investment products, like retail investment funds.

"Regulation will be a continuing reality for companies operating in fintech," reflected Michael Loughran, Head of Software Excellence (Hong Kong), Zühlke, who attended the discussion. "There's an opportunity for companies to adopt a 'just-right' approach that nurtures incremental innovation even in a highly-regulated space."

AI: Building common ground

AI has seen rapid growth in adoption by finance and banking players – thus generating a good deal of discussion throughout HKFTW.

Although banking core functions remain unchanged, AI has transformed the way they are executed. For instance, a panel discussion demonstrated AI’s digitisation of the customer experience, from using large language models to run customer-facing apps to insurance use cases for generative AI.

What’s holding AI back from broader implementation in the financial space? For one thing, stakeholders don’t often see eye-to-eye on the problems that need to be solved, reducing the viability of the AI intended to solve them.

While generative AI holds immense potential for the banking and insurance sectors, the industry also acknowledges that it comes with significant limitations and risks. Ethical and security concerns highlight the need for careful implementation, ongoing monitoring, and corresponding regulation to ensure they are used responsibly and ethically.

With the right approach, companies can adopt strong cross-discipline cooperation to operationalise AI solutions. 

AI use cases in the fintech space

Incorporating generative AI requires not just technological readiness but also a strategic approach grounded in well-defined business cases. Some fast-developing use cases in the generative AI space were presented at HKFTW.

Personalised financial advice and product offerings

Banks are using generative AI solutions to create personalised financial advice and products for their customers. By analysing a customer's financial history, spending patterns, and life events, advisors can leverage AI to generate customised financial plans, investment strategies, and even tailor banking products like loans or credit cards to better suit individual needs.

Chatbots powered by generative AI represent a true game-changer in terms of how banks can interact with customers. HSBC’s customer service chatbots are an instructive example: Instead of relying on stock pre-programmed answers, the generative AI-powered virtual assistant can learn about a customer’s specific needs and customise its answers accordingly. 

The insurance sector can now use generative AI to automate the claim processing process. By leveraging “Ask Your Documents”-like solutions, insurers can efficiently aggregate large amounts of data in different formats, including claim documents, images of damage (in cases of auto or property insurance), and other pertinent information. This data serves as a crucial input for AI models, enabling them to assess the validity of claims and estimate the appropriate payout amounts.

This reduces processing downtime, minimises human error, and improves customer satisfaction by providing quicker resolutions. It can also detect fraudulent claims more effectively, saving costs for the insurance company.

Risk Assessment and Management

Both banking and insurance companies leverage generative AI for more sophisticated risk assessment and management. AI-powered solutions can simulate various scenarios, analyse patterns in large datasets to identify potential risks, and suggest mitigation strategies. For instance, in banking, this could involve using AI to assess credit risk; while in insurance, AI could help evaluate the risk of insuring certain individuals or assets.

Institutions from both sectors can manage risk more effectively with AI, leading to improved financial stability and better-informed decision-making. It also supports regulatory compliance, by ensuring that risk management practices are up-to-date and robust.

These use cases demonstrate the promise of generative AI in the banking and insurance sectors: not only streamlining operations,  but also generating new revenue through more personalised and enhanced services to customers.

The 2023 edition of Hong Kong FinTech Week was a gathering ground for established financial players and FinTech upstarts alike. The theme of “FinTech redefined” pointed attendees to a future where finance and technology united under a Web3 ecosystem to create more efficient, accessible, and secure financial services. 

As a HKFTW FinTech Partner, Zühlke was able to showcase our expertise in driving digital innovation and transformation in the finance and banking sector, including live demos and use cases of generative AI within the space.

“Technology innovators like us can help banks and Fintechs to digitise their operations, replace workflows with data-driven approaches, and move to the leading edge driving the future of financial services in the region,” explained Johnny. “There’s a vibrant and dynamic future for FinTech in the region, and we’re proud to be part of it.”

Keen to learn more about our offerings and innovative solutions in the financial services space? Contact Zühlke today.