Unlocking the Benefits of Digital Transformation in Hong Kong’s Financial Services Sector
Lessons from Kodak: victim of its own success
The bankruptcy of Kodak serves as a poignant reminder of the challenges and opportunities facing the financial industry in the age of digital finance. As someone who is deeply committed to promoting the development of Hong Kong’s FinTech industry, and who also happens to have a passion for photography, I am acutely aware of the lessons that can be learned from Kodak’s downfall. Indeed, as the traditional financial industry in Hong Kong grapples with the seismic shift towards digitalization, it is more important than ever that we consider the innovative transformation that is required to ensure continued success. Failure to do so could result in a situation where Hong Kong becomes a victim of its own past achievements, rather than a leader in the new economy era.
Historically, the policies aimed at promoting innovation and technology development in Hong Kong have been found wanting. Despite some recent efforts to increase governmental support for STEM education, there remains a significant gap when compared to the levels of investment made by other leading international cities. This lack of adequate investment and attention from the Hong Kong education sector could potentially result in the city falling behind its international peers in the future development of digital finance. Presently, the government’s backing for relevant courses is insufficient, while the opportunities for collaboration between companies and schools to undertake internship projects are also insufficient. These factors serve to exacerbate the challenges faced by Hong Kong as it seeks to remain competitive in the rapidly-evolving field of digital finance.
Effective measures have a limited period of validity
It is evident that the Hong Kong government lacks the necessary sensitivity and responsiveness to effectively respond to the demands of the new economy. The existing government structure has not been adjusted in a timely manner, resulting in a lack of interdepartmental collaboration mechanisms and ineffective policy support. Moreover, the absence of consistent and effective policies in the digital finance sector has led to a situation where various departments appear passive and lack initiative. As a result, they have not been actively involved in international financial standard-setting and regulatory cooperation, further exacerbating the gap between Hong Kong and its international peers in the realm of digital finance.
The Hong Kong government is currently lacking a specialized department specifically dedicated to data management. There is a notable absence of a dedicated agency that is tasked with managing and supervising data resources, and the government has not established timely data privacy and security standards similar to those implemented by Mainland China and the European Union. This has resulted in the digital finance industry in Hong Kong encountering significant risks and challenges. Furthermore, the government has not put in place a comprehensive data opening and sharing mechanism, which has restricted innovation and development within the digital finance sector. Consequently, Hong Kong is finding it difficult to compete with other international advanced cities in this field.
The pandemic is like a mirror that exposes the ugly truth
One of the major hurdles that Hong Kong faces in the digital finance era is the lack of comprehensive management of personal identity. This issue is of critical importance, as the government has failed to establish a specialized department entrusted with the responsibility of formulating unified identity recognition standards and authentication mechanisms. This has resulted in grave concerns regarding the protection and application of personal identity information. Furthermore, the government has not provided adequate support for research and implementation of new identity authentication technologies, thereby severely limiting the potential for development within the digital finance sector. It is imperative that the Hong Kong government takes swift and decisive action to address these issues and establish a framework that can facilitate the secure and efficient management of personal identity in the digital age.
In recent years, Hong Kong has encountered several daunting challenges, such as slow responses to epidemic prevention and control and uncertainty regarding digital asset trading. The government must make timely decisions in response to such challenges, but due to a lack of data foundation, it is often uninformed and ill-equipped to act quickly. Although blockchain technology is widely used, there has been a lack of cooperation and timely decision-making among key government bodies such as the Hong Kong Monetary Authority, Securities and Futures Commission, Financial Services and the Treasury Bureau, and more. This has led to the exodus of talented individuals, funds, international companies, and even the entire virtual asset trading market from Hong Kong.
Therefore, it is imperative that the Hong Kong government optimize relevant policies and regulatory mechanisms to promote the city's economic development and international competitiveness. By establishing a robust and comprehensive data foundation, the government can improve its ability to make timely decisions and respond effectively to challenges. Additionally, greater cooperation and coordination between key government bodies will be necessary to ensure that regulatory processes and approval procedures are adjusted in a timely manner to keep pace with technological advancements.
To adapt to the changes in the global market, embrace digital asset trading
In order for Hong Kong to maintain its position as a leading international center for digital finance, the government must adopt a proactive approach towards promoting its development. This involves establishing clear and consistent policies for digital asset trading, which will help to attract and retain talented individuals and companies, and promote the growth of the virtual asset trading market in the city. By taking these steps, the government can ensure that Hong Kong remains at the forefront of digital finance, and continues to thrive amidst future challenges.
To achieve this, the government must prioritize innovation, invest in education, and establish a robust framework for data management and identity protection. By creating an environment that is conducive to the growth and development of digital finance, Hong Kong can leverage its financial expertise and embrace the opportunities presented by the digital age. This will not only benefit the city's economy but also position it as a leader in the global digital finance landscape.
Laying the Groundwork: Beyond Just Saying We Must Act
To promote the development of digital finance, the Hong Kong government should vigorously develop the following areas:
In order to thrive in the digital finance era, the Hong Kong government must prioritize several key areas of focus. First and foremost, it should adjust its government structure, cultivate professional talent, and strengthen personal information and data security governance. This includes establishing a flexible policy ecosystem that can coordinate policy consistency and effectiveness, while also balancing regulatory compliance with innovation.
Organization Structure
To achieve this, financial regulatory agencies should establish corresponding mechanisms to adjust regulatory policies in response to future changes quickly. The Hong Kong government should also establish a cross-departmental cooperation mechanism to ensure policy consistency and effectiveness, while also dynamically evaluating and revising policies. This requires strengthening the technical training of civil servants, improving their understanding and analytical capabilities of emerging technologies, and promoting innovative cooperation.
Data Governance
To further support these efforts, the government should establish an information management department and a data governance framework. This includes developing data strategies, establishing standards to ensure data security, and coordinating responsible data usage across government departments. In addition, the government should implement paperless policies and improve information technology infrastructure and tools to enhance efficiency and streamline processes.
By prioritizing these areas, the Hong Kong government can establish a robust foundation for digital finance, promote sustainable economic development, and position the city as a leader in the global digital finance landscape.
Blockchain Adoption
Another crucial area for the Hong Kong government to prioritize in the digital finance era is the development and promotion of blockchain technology. To achieve this, the government should establish a blockchain technology expert committee comprising local, Mainland, and foreign experts. This committee should regularly evaluate the impact of technological progress on the financial industry and adjust regulatory policies accordingly.
In addition, the government should promote cross-departmental and cross-industry collaboration to encourage innovation and application of blockchain technology. This includes establishing a blockchain technology application sandbox to provide a testing platform for financial technology applications, allowing for experimentation and refinement of new ideas.
Furthermore, the government should strengthen regulatory cooperation with international organizations and other advanced cities to establish international standards and guidelines for regulatory compliance. This will help to ensure that Hong Kong remains at the forefront of the global digital finance landscape and can effectively compete on a global scale.
By prioritizing the development and promotion of blockchain technology, the Hong Kong government can leverage the potential of this innovative technology to promote sustainable economic growth and cement its position as a leader in the digital finance era.
Tech-savvy Talent pool
Last but not least, the development of a skilled and innovative talent pool is critical for Hong Kong to succeed in the digital finance era. To achieve this, the government must establish a comprehensive talent development mechanism that promotes cross-disciplinary and cross-industry collaboration.
This includes improving the education system and investing more in STEM education, as well as establishing talent training institutions to cultivate a professional and innovative talent team. The government should also provide incentives for financial technology innovation and entrepreneurship, encouraging the development of new ideas and technologies.
To further enhance Hong Kong's competitiveness in the global digital finance talent market, the government should establish an international exchange platform for talent. This will allow for the exchange of ideas and knowledge between professionals from different countries and industries, promoting innovation and collaboration on a global scale.
By prioritizing talent development, the Hong Kong government can ensure that the city remains at the forefront of the digital finance industry, attracting and retaining the best and brightest professionals from around the world. This will ultimately help to promote sustainable economic growth and position Hong Kong as a leader in the global digital finance landscape.
Path to Avoiding Obsolescence in the Digital Finance Era
The rise of digital finance presents both opportunities and challenges for Hong Kong. To stay ahead of the curve, the government must take a proactive approach towards responding to the changing landscape. This involves adapting the government structure to better accommodate digital finance, establishing a flexible policy ecosystem, and nurturing a pool of talented professionals.
In a nutshell, Hong Kong must prioritize the development of blockchain technology as a key driver of digital finance. Additionally, the establishment of a comprehensive personal identity management system will enhance the city’s data management and protection capabilities, further strengthening its competitiveness in the new economy. Furthermore, a talent development mechanism must be established to ensure a steady supply of skilled professionals who can navigate the rapidly-evolving world of digital finance.
By taking these steps, Hong Kong can position itself as a leader in the global digital finance landscape, promoting sustainable economic development for years to come while avoiding the mistakes that led to Kodak's demise.
