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04/12/2019 18:01

Virtual banks & FinTech to shake up banking industry in HK

[ET Net News Agency, 4 December 2019] The launch of virtual banks in Hong Kong in early
2020 is set to disrupt the traditional banking model and blur the lines between different
sectors, according to KPMG's Hong Kong Banking Outlook 2020.
At the same time, banks are expected to adopt more technology solutions to manage costs
and achieve operational efficiency amidst a rapidly evolving and increasing competitive
banking industry landscape.
"Reflecting first on 2019, we expect to see muted financial results across Hong Kong's
banking industry this year, with ongoing market uncertainty around the US-China trade
tensions and the low-interest-rate environment being the key drivers. The recent events
and business disruption in Hong Kong have also impacted retail investor confidence.
Despite a challenging year, we continue to see opportunities for investment and growth for
banks in 2020," said Paul McSheaffrey, Partner, Head of Banking & Capital Markets, Hong
Kong, KPMG China
The arrival of virtual banks is expected to have a greater impact in the SME space, with
many in Hong Kong currently underserved and hungry for credit. SMEs may be tempted to
switch their accounts as they will likely start to see an improvement in their ability to
open bank accounts and obtain access to finance through the new virtual banks. In
response, many traditional banks will seek to accelerate their IT and systems
transformation, invest in new technologies and upgrade their digital platforms to compete.
At the same time, with margins continuing to be squeezed and macroeconomic and
geopolitical uncertainty set to carry over into 2020, managing costs will continue to be a
key focus for banks in Hong Kong. Leading banks will take greater strides in the year
ahead to adopt AI and related digital solutions and collaborate closely with FinTech
players to achieve longer-term savings.
The year 2020 may also see an increased focus on customer intimacy in the corporate
market. Banks that are able to leverage the data to predict behaviour and create
personalised experiences for their customers will give themselves a chance of long-term
survival.
"Innovative mainland Chinese banks will continue to actively invest in developing their
big data application and advanced technology capabilities to improve customer experience.
Leading banks will also explore and identify the appropriate data governance approach,"
said Terence Fong, Partner, Financial Services, KPMG China. (KL)

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