With the recent roll-out of HKMA’s Fintech 2025 strategy, it is sending a very loud and clear message to all financial institutions, which is ‘all banks go Fintech’. Fintech(s), Virtual Banks and payment solutions are definitely the future. While Hong Kong is picking up the pace in this area, we have people standing at the forefront striving to make it happen and benefiting people in Hong Kong. A leading talent solutions expert, Hudson recently had an interview with SK Lee, Chief Compliance Officer at RD Wallet Technologies and Simon Yip, Head of Compliance at Mox Bank. Hudson colleagues who joined this interview include Steven Sin, Managing Consultant and Head of Legal & Compliance, Isabella Chung, Associate Consultant, Compliance and Sid Sibal, Regional Director, Hong Kong.

 

Why they chose Fintech?

Simon and SK both chose to join Fintech & Virtual banks from a traditional banking background. Simon believed that Fintech is definitely the future and it will better serve the people in Hong Kong. So when his Head of Compliance at Standard Chartered Bank Hong Kong asked him if he was interested to consider a role with the new initiative, a virtual bank, he said yes without hesitation. SK made it clear that actually traditional banks have never stopped doing or investing in Fintech, but a fully dedicated virtual bank or a Fintech company is in a more advantageous position to move faster and be more innovative to address customer needs. He believed the trend was very clear and he was eager to join a firm that would put 100% of its focus in the digitalization of banking and financial services.

 

 

Cultural Shock

When they are asked whether they experienced any initial ‘cultural shock’, Simon said the first time he joined Mox Bank, he did feel like it was a totally different organization. They started off with a 20 people working group with a very energetic and creative vibe. It was a challenge from the first day, but also with a feeling that he was doing something important for the people of Hong Kong and ‘breaking all boundaries’ of what he knew and did before. SK felt the same way that all members of the ‘core’ team had to be highly competent. Whenever they face obstacles and challenges from various aspects, the team were united and shared the same vision on improving banking and financial services for customers, and carried on until success. Although having been in Financial Services for more than 20 years and seen it all, he felt the current Fintech trend was something really different and truly exciting.

 

About Innovation

We then asked Simon and SK to name their top 3 favourite or impressive apps. Simon said the Mox Bank App was most definitely one of his favourite apps because it was able to acquire a customer in just a few clicks. Another feature that really stands-out with the Mox Bank App is the ability to create supplementary accounts. He personally uses this and enjoys it as it gives him the opportunity to teach his children the ‘101’ of banking and money management. The Mox Bank app also brings that balance between ‘fun’ and money management, and reinforces the theme of ‘Mox Generation’ which bridges the gap between all generations and not just for the young generation. Their most senior customer is over 90 years old!

SK opined that user experience is absolutely critical. There could be a huge difference between what the bank wants and what customers really need, bridging that gap smoothly is what creates the perfect product. His favourite apps that he uses daily for several years is Spotify, with which he appreciates its great design to understand and address customer needs. Another app that SK thought really brings an excellent mix between digital banking and ‘fun’ is also ZA Bank’s App. The ‘Lucky Draw’ feature in the ZA App really is a game-changer, it brings the usage of the app to the next level.

 

Current FinTech landscape in Hong Kong

With still relatively low adoption, high costs with regards to technology & personnel investment, new and frequent regulatory requirements and limited margins – profitability for FinTech companies at present continue to be an issue. How about the Virtual Banking adoption in the Hong Kong market? Simon pointed out that banking business is a ‘trust business’ – it definitely takes time and there are a lot of things that come into play to strengthen this trust. At the start, each bank had a good share of customers who are categorized as ‘early adopters’ – these were typically customers who were working in the Tech sector or have some commonality with the tech ecosystem. The next population section is the main one and it continues to be one –

which are the customers who bank with the global banking giants/note-issuing banks who manage multiple billions of dollars. Reducing that trust difference between both and strengthen the bank’s internal capability to boost the ‘trust factor’ is the daily focus. SK believed that it wouldn’t necessarily take 10 years for the adoption to reach a substantial percentage, rather it might just take 3-5 years instead with a comprehensive list of financial products being offered by the Virtual Banks - there is steady and good progress.

 

HKMA’s ‘Fintech 2025’ Strategy

With the recent roll-out of HKMA’s Fintech 2025 strategy – what will the HK Fintech market look like in the next 10 years? According to Simon, they work very closely with the HKMA to enable digital transformation in every aspect of banking. The bank works closely with the regulators to ensures all these rules are properly considered and accommodated into its platforms. Simon thought it’s very interesting that in other parts of the world the technology firms are driving the change for tech-adoption within Financial Services, whereas in Hong Kong this is coming from the government and regulators. This is causing banks to scramble and create a proper roadmap for their technology evolution. SK has worked at the HKMA for 10 years and understands both sides of the table. He believed that both parties gladly welcome this initiative and it will eventually benefit the people of Hong Kong. The theme of ‘all banks go Fintech’ is a very loud and clear message to all financial institutions. ‘Big Data’ is definitely the future, but FIs need to understand how to use it better to improve their products and service quality. This is always discussed, but it is yet to be seen fully utilized.

Traditional banks are investing more resources in e-banking and digital transformation. To what extent can fintech compete with traditional bankings’ new actions? SK shared that at present there are 8 virtual banks in Hong Kong – all of which were in loss positions as of end-2020 while need to face investors’ expectation and question about the way and time to breakeven. If any of the 8 virtual banks just simply focus developing an identical product to what the traditional banks (with similar features) have been doing, the chance of success would be less likely and this may not be in line with their investors and customers’ expectations. All the virtual banks have ‘think-tanks’ focusing on designing and developing brand-new products or products which innovative features making a different from traditional ones already in the market. This innovation is vital for their continued progress.

The HKMA also discussed the future-proofing of Hong Kong for Central Bank Digital Currencies (CBDCs) and close collaboration with the People’s Bank of China in supporting the technical testing of e-CNY in Hong Kong. This could bring drastic changes into the payment space. How can FinTechs prepare for this? SK said that regulators around the world have expressed concern about the lack of or non-existence of intrinsic value of crypto-currencies such as Bitcoin, ETH, etc. Even some may feel a little bit more comfortable with Stablecoin that is backed by real currency/fiat, there need to have an ecosystem for payment accepted in the “real world” rather than only in DeFi in order to have a greater success – there is still a long way to go for that. If CBDCs is the key focus of the central banks for designing and promoting their own digital currencies, the technology underlying which will very likely improve the transparency of the fund flow address traditional difficulties in tracing, analysing and investigating suspicious transactions from AML/CFT perspectives. He expected that CBDC development in the Mainland China will likely have important implication and useful reference for Hong Kong in considering its own design of CBDC (eHKD).

Current and future FinTech Talent challenges

Simon shared his insights in current challenges in hiring and identifying Fintech/Virtual Bank Compliance candidates. Both compliance knowledge and open-minded personality and ability to accept ‘new’ things are equally important. Most candidates say they are open to ‘new’ things but only some are able to demonstrate with proper examples that they have done things differently to accommodate or have a passion to learn more about Fintech. Attrition rate continues to be an issue for most virtual banks and while this can be challenging in the short-term, another way to look at it is that Mox Bank is creating an alumni of Fintech talent potential for working together as business partners, serving the people of Hong Kong with better products and solutions in the long-term. SK agreed that candidates may seem more jumpy nowadays, which makes it difficult for some interviewers to trust their passion. And he chimed in with Simon that it seems to be difficult for candidates to showcase their interest and passion during the interviews.

Then what qualities do they look for in candidates who are interested to join the Fintech industry and what more can Compliance professionals do to equip themselves for the future? Simon also expressed the qualities that employers look for. He mentioned that along with technical and personality skillsets, he also looks for an aspirational value in candidates. He personally would love to contribute as to the Fintech community of Hong Kong and in the future tell his son & daughter how he becomes one of those who can change the landscape. He tries to look for a similar value in potential candidates joining his teams. His advice to professionals who are in the cross-road of deciding between a tradition platform and a Fintech platform is that ‘change is already here’ and think carefully about your skillsets at present vs. what may be required in the future and then make your decision.

SK would ask the candidates who interview with him – ‘have you bought crypto?’ He believed that it all comes down to the mind-set of the candidate. For candidates who are born in the 1980s – they should have built a good level of expertise in certain areas while still have a long way to go in their career path, and for them the ‘experience in Fintech’ is going to become more crucial if they aspire to join this sector in the future. So why wait while your competitors are already gaining this valuable experience? Candidates need to be more pro-active, have a hunger to learn and the courage to try.