Euromonitor International joined the Hong Kong FinTech Week (HKFW) 2023, identifying five key trends with global impact shaping the future of finance: namely cross-border transactions; artificial intelligence (AI); embedded finance; digitalisation and ESG opportunities. Besides cross-border transactions discussed in a prior article, this opinion focuses on the latter four key trends.
Urgency to explore and invest in practical AI applications to improve productivity
Representatives from financial leaders (including HSBC, JP Morgan, Microsoft) shared their views on the importance of experimenting and investing in practical AI applications to drive efficiency, especially in trading and risk management.
Euromonitor International’s Voice of the Industry: Digital Survey (n=644) fielded in November 2022 also showed that 64% of business leaders globally ranked AI as the top technology impacting business in the next five years, increasing from 58% in 2021.
HSBC alone has been exploring several hundred use cases of generative AI. For instance, HSBC Global Banking and Markets rolled out the “AI Markets” tool in May 2023, its own version of “ChatGPT” targeting institutional investors. With a few key words, the HSBC AI Markets tool assists clients in generating relevant insights and analytics, powered by AI engines’ screening of HSBC’s proprietary real-time and historical cross-asset trading data and latest market insights. With the option of customisation, clients of HSBC are expected to enhance work efficiency, save time and cost in risk analysis, new products trading, and trading management, amid increasing complexity of financial markets. In addition to large AI models, alternative investment areas also include AI chips (Nvidia, etc), aligned with the insights shared by Euromonitor International’s experts in the ASEAN Investor Conference in October 2023.
Growing embedded finance partnerships
Embedded finance was also discussed intensively, especially for cross-border transactions. For fast remittance (less than 20 seconds), Wise powers Swift, Bank Mandiri, ZA Bank, while Tencent partners with Wise for inbound remittance into Mainland China.
For the cross-border QR transaction, BoC Pay (a digital wallet App of Bank of China Hong Kong) is powered by UnionPay. This greatly benefits clients, eliminating the need to develop new rails. Embedding the Central Digital Bank Currencies (CDBCs) promoted by the central banks, BoC Pay also pioneers cross-border transactions of e-CNY between Mainland China and Hong Kong SAR.
Acceleration of digitalisation in payment, trade finance and investment
It was shared in the conference that cash payment will drop to only 1.6% of POS transactions in Hong Kong SAR by the end of 2024. Euromonitor International data also showed that the value of cash transactions (combining personal and commercial) in Hong Kong will decline from 17% in 2020 to 9% in 2024. Although retail and travel industries in Hong Kong SAR have largely adopted cashless payments, there are still digitalisation opportunities in wet markets and taxis.
Furthermore, HSBC has been digitalising trade finance to remove cumbersome paper work, leveraging CDBCs as well as tokenisation of deposits. Supported by blockchains, HSBC Orion will launch the service of issuance and transfer of European investment bonds, as well as tokenising gold.
Significant ESG opportunities in investment and insurance
For financial inclusion, Mox by Standard Chartered obtained a securities trading licence in June 2023 to launch “Mox Invest”, an equity trading service (especially micro-investment) for US and UK stocks, addressing the pain points of mass affluent consumers with limited access to wealth advisors.
HSBC also promoted “Easy Invest”: Hong Kong SAR residents aged 18-25 years are entitled to zero commission fees for investing stocks. Supported by over three million PayMe (HSBC Hong Kong’s digital wallet) users in Hong Kong SAR, HSBC also encouraged small to medium enterprises to use the PayMe Business App, reducing their expenses by accepting proximity or remote payments without POS devices.
In addition, Insurance Authority of Hong Kong SAR also highlighted the gaps in cyber insurance to protect customers against cybercrime. Furthermore, insurance businesses and insurtechs are encouraged to develop new solutions in green sustainable finance products, powered by data-driven analytics.
Promoting international collaboration and innovations in the above five key areas, Hong Kong FinTech Week 2023 was a great success. In addition, digital banks in Hong Kong SAR have been challenging incumbents to transform, giving greater reference for banking peers in South East Asia and the rest of the world.
Please read our strategy briefing, Disruptive Trends of Digital Banks in Asia Pacific and Australasia: How to Win the Profit Battle, for further details on the key success factors of profitable digital banks and the competitive landscape of digital banks in Asia Pacific.
On the embedded finance topic, Euromonitor International published three strategy briefings, discussing the driving factors, key products and cross-border transactions, providing insights for financial institutions and non-financial businesses to explore strategic partnerships.