Hong Kong’s banks to harness technology and data to compete with virtual banks and improve regulatory compliance, finds KPMG 2019 outlook

Hong Kong’s banks to harness technology and data to...

New challenges also call for a renewed focus on conduct and the customer, enabled by technology


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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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About KPMG China

KPMG member firms and its affiliates operating in Mainland China, Hong Kong and Macau are collectively referred to as “KPMG China”.

KPMG China is based in 21 offices across 19 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Wuhan, Xiamen, Xi’an, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.

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In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG’s appointment for multi-disciplinary services (including audit, tax and advisory) by some of China’s most prestigious companies.

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