But as expected, there are also challenges that come with fintech expansion: cyber-attacks, phishing emails and other scams are reportedly on the rise, a trend that needs to be addressed before it becomes alarming. Banks must continue to stay ahead of fraudsters through constant building and rebuilding of defences, rigorous stress testing, and educating customers about cyber safety. The enhanced Cybersecurity Fortification Initiative, soon to be launched, should provide banks with a robust framework for managing the risks. 11. Growing reliance on data analytics raises questions about data ownership and privacy. As we have seen in some other jurisdictions, AI and machine learning also introduce the risk of discrimination, sometimes in hidden forms. Banks have to guard against this by ensuring ethical, fair and transparent treatment of customers, and by correcting model aberrations using human intuition. 12. We realise that banks are at different stages in their adoption of AI technologies. For this reason, our risk management approach as a regulator is based on high-level principles rather than on detailed prescriptions that might stifle innovation or be disproportionate to the risks involved. 13. Technology is not just about banks and their customers – it is also an important part of banks’ relationship with the HKMA. As we are a key part of the technology ecosystem, our aim is to add value by facilitating the industry’s technology adoption through a range of initiatives, such as the AML/CFT Regtech Forum and the Regtech Watch newsletter.
As a regulator, we are pleased to witness the progress made by the industry in using Regtech to combat longstanding issues – for instance, Natural Language Processing has been adopted to control conduct risk associated with the marketing of financial products, while Supervised Machine Learning can be deployed to more accurately help AML analysts flag suspicious transactions. 14. Understanding and facilitating the technology needs of the industry improves our own setting of supervisory priorities in a forward-looking manner. The HKMA’s three-year roadmap for Suptech adoption has identified, as key areas of focus, the need for a knowledge management system to handle structured and unstructured information, and the need for capabilities to analyse granular data. The aim is to make our supervisory work more effective without placing unnecessary burdens on banks. We have begun pilot projects to assess the suitability of various solutions. Cross-border banking 15. Technology has enhanced the use of our natural geographic advantage to participate in another major transformation: the growing interaction with the Mainland financial markets, particularly in relation to the Greater Bay Area. 16. As a leading international financial centre, Hong Kong has a long and successful history of serving as a gateway to the Mainland markets. We are the world’s largest offshore hub for renminbi business. Schemes launched in recent years, such as Stock Connect and Bond Connect, have expanded opportunities for investors.