Newly licensed virtual banks and insurtech companies laid out their visions and strategies for growth, while more seasoned fintech players from across the globe offered lessons learned through hard experience, on the second day of the main conference of Hong Kong Fintech Week, organised by Invest Hong Kong (InvestHK).
The recurring theme throughout the day was that while technology is blurring or breaking through boundaries and upending the world around us, it’s important not to forget that it should only be a tool to help improve lives for people.
Tech as a Means, Not an End
Perhaps the biggest and boldest upending came from HKEX Chief Executive Charles Li, who laid out his ambition for the exchange to become the global pioneer in trading the kind of data flows that are driving fintech innovation today. By capturing everything from sales of petrol at the pump to microwave ovens leaving department stores, technology can provide market moving – and marketable – insights into economic performance, he said. “In the future, data can trade as a new asset class.”
Right now, China is the only large country that has reached this level of digitisation, and this is driving another upending of huge importance: the creation of a fundamentally different system of economic governance based on blockchain.
“If the economy can be organised through technology, then the government doesn’t have to build massive amounts of bureaucracy, massive amounts of regulatory forces, massive amount of trust in institutions like the West did,” Mr. Li said. “Blockchain can redefine economic relations between people.”
Jing Ulrich, Managing Director at JPMorgan Chase & Co., said during her panel – Investing in Fintech: Hype vs Reality – that blockchain’s potential was because it was “simple, beautiful and invisible”, a reminder that to become truly successful, innovations need to become part of the fabric of everyday life, something that is essential but which goes unnoticed “like the air that we breathe”.
Anand Rao, Global Leader in Artificial Intelligence at PwC, said: “A more revolutionary change is where you have a virtual bank where there is no bank.”
Seen this way, the march of fintech progress isn’t a binary winner-takes-all match of human vs machine. As TIMO Co-Founder Claude Spiese put it: “Innovate for customer benefit, not for technology’s sake. If you can do it better with a cup of coffee than with an AI algorithm, do it with a cup of coffee.”
The Rise of Virtual Banks & Insurers...
In the first morning session on insurtech, Clement Cheung, CEO of Hong Kong’s Insurance Authority, said that while Hong Kong ranks second globally in terms of density of providers and penetration of coverage, those numbers belied deeper structural issues. Insurtech offered the key to healthy development of the city’s insurance landscape, improving coverage and product balance, financial inclusion and – ultimately – social harmony.
ZA Tech Global’s CEO Billy Song said insurtech can help reduce the distance between insurance companies and customers, citing an innovative pay-as-you-drive policy with DiDi and Grab drivers that makes coverage more affordable. To be able to offer such services at low cost will come down to the ability of companies to process and analyse enormous volumes of data, he said, pointing to the data of around 400 million customers the company holds.
Utena Treves, Chief Strategy Officer of wefox Group, added that technology can cross borders and break down silos, allowing highly customised products with on-demand coverage. Tarun Mathur, Co-Founder of Policybazaar.com, said it was important to remember that while new technology helped drive proliferation of products and services, the ecosystem is defined by the customer and not providers.
Charles Hung, CEO of Blue, said: “The best insurer overall is thinking about what the customer needs on their journey, whether that means digital or not… By selling insurance online, you are not a digital insurer. You need to address market pain points in a meaningful way.”
That was a theme picked up on by Ricky Knox, Co-Founder of Tandem Bank, who cautioned against the idea that despite rapid growth in customers – 8 million in the UK out of an adult population of 40 million – digital banks will easily supplant the bricks and mortar model of the incumbents. “It really is a minority sport to be closing your old bank account,” he said. Alex Twigg, Co-Founder of Judo Bank, said virtual banks should aim to be good at one service first and try to diversify their services later.“
The difference between being a fringe player and becoming the new normal is: can you disrupt the branch?” said Coen Jonker, Co-Founder & CEO of TymeGlobal. “Around the world, people still trust the branch.”
Citi Hong Kong and Macau CEO Angel Ng echoed that idea, saying in some ways the legacy of being a long-established brand was a drag on the impulse for radical innovation: “Besides being ‘cool’ we also need to be trusted.”In Hong Kong’s case, a third of people say they wouldn’t trust virtual banks with their money. Conversely, the vast majority also say they are dissatisfied with their existing bank, PwC’s APAC Digital Banking Leader Harjeet Baura said.
Deniz Güven, CEO of Virtual Bank, Standard Chartered Hong Kong, said that when customers were asked to use a character or animal to describe their current bank, “sloth, elephant and mosquito” were just a few of the answers for the slow, antiquated, outdated systems. “We aren’t giving KPI’s about gaining customers. We are giving KPI’s like ‘can we onboard the customer in less than 3 minutes’”, he said.
But while that’s true and sounds like it should spell opportunity for virtual banks, Baura said those aren’t the reasons most people would give up on their current bank. Customers are instead most frustrated by the lack of integration in bank platforms. And that’s not just integration between financial products. Customers are looking for some kind of integrated platforms that go beyond bank services, he said.
In the day’s final session, Anthony Sar, CEO and Co-Founder of FINNOVASIA, the official organiser of Hong Kong Fintech Week, observed that many of the best ideas and developments in fintech were coming from outside the financial services industry.
With so many speakers from around the world, the conference provided a timely reminder that diversity is an essential ingredient in resilience. Rather than fintech relentlessly rolling the world into a flattened and featureless one-size-fits-all platform, companies must adapt their business propositions to the different realities on the ground.
That was the clear message from the fireside chat between Origami’s Yoshiki Yasui and SG Lee of Toss, both founders of payment platforms that have developed offerings tailored to the unique conditions in their home markets of Japan and South Korea. SG Lee pointed out that the average Korean, for example, has 5.4 bank accounts and 3.2 credit cards, eight out of 10 of them have a bank loan and the country has two credit bureaus. Yet despite being one of the most connected societies in the world, the uptake of fintech solutions has been slow, giving ample opportunity for expansion.
Founder & CEO of Singlife Walter de Oude is blurring the lines between financial services to provide customers with simple ways to manage and grow their money. “When we started out we just wanted to build a life insurance company that was better than the others. We are now reshaping the entire financial services spectrum,” he said.“As a digital company, the whole purpose is to connect to everything,” said de Oude. “If a customer has a need, we want to connect them with a channel to help them. Our job is no longer about drawing one-way lines within different verticals within the industry.”
Secrets of Success & Picking Winners
“We really are still at the beginning of the fintech transformation,” said Jonathan Larsen, Chief Innovation Officer at Ping An Group and CEO of the Global Voyager Fund.
Even so, “finding targets where the upside doesn’t have to be given away at the point of entry” has grown harder – and that’s before the difficult process of getting the deal done.The secret to sustainable models for fintechs in the lending space is how well they can gauge creditworthiness, said Credit Karma Founder Kenneth Lin. Given most lack a long pedigree in underwriting, the next recession will really test them. Kreditech CEO Alexander Graubner- Müller said agility is key to survival: “Make sure you have a system that allows you to pick up signals and adjust underwriting accordingly.”
But for those worried about the signs of a global downturn that would have the biggest impact on the SMEs, which many of today’s speakers identified as the most under-serviced and most desirable customer base, some possible good news from Kathryn Petralia, Co-Founder and President of Kabbage, who told The Information’s Shai Oster that she’s “not seeing any signs of softness” in U.S. small businesses.
Hong Kong Stage Roundup…
Though Hong Kong is a small portion of the GBA overall population, Head of Employee Benefits AMTD Group, Betty Ho, stressed the growth potential for digital insurance in Hong Kong. “The Hong Kong market is still one of the largest and fastest growing, and there is still an opportunity to grow both direct and digital insurance sales.”
The Hong Kong stage closed with Avi Cohen, Co-Founder & CEO of The Floor, and his take on disruptive tech trends in global banking. Cohen highlighted homomorphic encryption as the latest development in big data, a key tool in helping big banks migrate to cloud technology while keeping customer data safe. “This is a huge shift in data science. This represents the next generation of how banks are managing data science in an encrypted environment.”
Seeing Fintech in Action
Visitors’ Hong Kong Fintech Week experience would be incomplete without the hustle and bustle of the local fintech community. During the week, Hong Kong Science and Technology Parks shared the latest fintech opportunities in Hong Kong and the rest of the Greater Bay Area at its HKSTP InnoExpress Programme, while Cyberport led the discussion on venture capital with over 900 venture capitalists, industry professional and startups at its Cyberport Venture Capital Forum.
On the final day of the week, the event will move to Shenzhen, where international attendees will have a rare opportunity to visit and meet with executives of the most innovative fintech companies that are headquartered in China’s Silicon Valley.