The Hong Kong FinTech Week 2023 stood as a pivotal event, bringing together a confluence of thought leaders, industry experts, and innovators to discuss and shape the future of finance and technology.

This blog aims to provide an in-depth insight into the wealth of knowledge shared across various panels from HKFTW 2023.

Financial Innovation

Panelist:

• Paul Chan, Financial Secretary of Hong Kong SAR

Driving Change and Innovation:

1. Platform for Innovation: The Hong Kong FinTech Week stands as a testament to the city's commitment to fostering innovation. It provides a collaborative space for stakeholders to converge, share ideas, and drive advancements in financial services, ensuring they are more accessible, inclusive, efficient, and valuable for users.
2. Impact on Lives: Fintech companies in Hong Kong are not just innovating for innovation's sake; they are making a tangible impact on people's lives. From providing livestock financing to empowering traditional financial institutions with AI and blockchain technology, the positive effects are far-reaching.
3. Rise of Virtual Banks: The popularity of virtual banks in Hong Kong is on the rise, offering a convenient, innovative, and cost-effective alternative to traditional banking. Small and Medium Enterprises (SMEs) are increasingly integrating virtual banking services into their operations, signaling a shift in the financial landscape.

Collaborative Efforts and Expansion:

1. A United Front: The success of Hong Kong's fintech sector is a result of collaborative efforts between the government, public, and private sectors. There is a concerted focus on investor protection and leveraging blockchain technology for capital market transactions.
2. Cross-Border Collaborations: Hong Kong is extending its fintech collaborations beyond its borders. This includes cooperation with the People's Bank of China to broaden the use of digital currency and establish linkages between payment systems in Hong Kong and Thailand.

The Future of Fintech: Tokenization

Tokenization stands out as a significant innovation in the fintech sector, streamlining capital market transactions and enhancing efficiency. The issuance of the first government-issued blockchain bonds is a prime example of this innovation in action.

Embracing Innovation, Regulation, and the Future of Finance

Panelists:

• Julia Leung, CEO of the Securities and Futures Commission (SFC)
• Christopher Woolard, Partner at Ernst & Young

Key Insights from the Discussion:

1. The Nature of Tokenization: Tokenization, whether applied to funds or bonds, does not alter the fundamental nature of securities. It serves as a technological enhancement, providing a new layer to existing financial instruments.
2. Regulatory Recognition: Regulators are acknowledging the efficiencies and cost reductions brought about by technology, particularly throughout the lifecycle of financial products.
3. Setting Clear Guidelines: The imminent release of two circulars aims to provide comprehensive guidelines and set clear expectations for intermediaries dealing with virtual assets, focusing on risk identification and due diligence.

The Road Ahead: Regulation and Finance

• Tokenization: An Evolutionary Step: Tokenization is perceived as an evolutionary development, with practical applications already in play, such as the issuance of digitally structured notes by Chinese banks.
• Clarifying Crypto Payments: Recent joint circulars from the SFC and HKMA have clarified the requirements for crypto payments, emphasizing the need for licensed custody.
• Prioritizing Investor Protection: The stability and maturity of technology are prerequisites for retail involvement in fintech, underscoring the importance of investor protection.
• Bridging Traditional and New Finance: The integration of traditional financial players with fintech innovators is crucial, necessitating regulatory frameworks that foster this convergence.
• Navigating AI in Finance: The rise of AI, particularly General AI, introduces new dimensions to finance, requiring vigilant regulation to ensure responsible and secure usage.

Family Office trends to watch in 2023 - The Rise of Family Office and Digital Asset Integration in Asia, Investment Strategies for Optimal Risk Exposure

Panelists:

• Annabelle Huang, Managing Partner, Amber Group
• Bernard Wai, Asia Pacific Head, Global Family Office Group, Citi Private Bank
• Angel Chia Chair, Family Office Association of Hong Kong
• Daniel Grossmann, Managing Partner, Kharis Capital
• Patrick Tsang, Chairman, Tsangs Group

Key Insights:

1. Leveraging Partnerships for Growth and Diversification: Family offices are encouraged to collaborate and form partnerships, fostering collective effort and diversification in investments. This approach, while potentially slower, ensures a holistic growth strategy.
2. Commitment to Impact Investing: There is a growing trend among family offices to engage in impact investing, focusing on sectors that align with their values and goals. The next generation is actively involved in these investment decisions, emphasizing long-term impact.
3. Navigating the Macro Environment: Investment strategies are increasingly being linked to macroeconomic trends, with a particular focus on Asian digital assets and food technology. Staying informed and adaptable is crucial for success in this dynamic environment.
4. Educating Family Principals: The responsibility of managing a family office extends beyond financial management. Family principals are encouraged to actively engage in learning and development activities, ensuring they are well-equipped to lead effectively.
5. Tailored Wealth Management Solutions: Family offices require customized services to meet their unique needs. This includes specialized portfolio strategies for digital and blockchain assets, ensuring secure custody and access to innovative investment opportunities.

Unreleased Survey Insights from Citi Private Bank:

In a revealing session at the Hong Kong FinTech Week 2023, Bernard Wai from Citi Private Bank shared exclusive data from an unreleased survey on Family Offices, providing attendees with invaluable insights. Here's a comprehensive breakdown of the key findings:

1. Diverse Asset Allocation: A significant 46% of the families serviced by Citi have chosen to diversify their portfolios with assets in private credit and equity. This highlights a strategic approach to asset allocation, ensuring a balanced and robust investment portfolio.
2. Strategic Shift in Asset Allocation: This year has witnessed a substantial reallocation of assets, with a notable increase in fixed income portfolios. Concurrently, there has been a 32% reduction in equity allocation, indicating a shift towards more secure and stable investment options.
3. Proactive Approach to Digital Assets: Family Offices are not just observing the digital asset space but are actively developing strategies to leverage them. This is underscored by their actions during the last bull run in 2020, where they sought yield from digital assets, even though it constituted less than 1% of the overall portfolio at the time.
4. Challenging the Status Quo: In light of the prevailing uncertainty, there is a clear movement away from the traditional 60/40 investment portfolio. Families are now adopting a more balanced approach, distributing their investments across cash, commodities, equity, and debt, each constituting 25% of the portfolio.
5. Commitment to Philanthropy: Philanthropy remains a significant focus, with 20% of families globally and a remarkable 29% in Asia actively engaged in charitable activities. This underscores a commitment to making a positive impact on society and contributing to the greater good.

CEO Dialogue: Reshaping the Future of Finance

Panelists:

• Mary Huen, CEO of Standard Chartered Hong Kong
• Luanne Lim, Chief Executive Officer of HSBC Hong Kong
• Aveline San, Chief Executive Officer of Citi Hong Kong & Macau
• SUN Yu, Vice Chairman and Chief Executive of Bank of China (Hong Kong)
• Kristi Swartz, Partner at DLA Piper

Key takeaways from the discussion emphasized the integral role of AI and big data in credit scoring, transaction monitoring, and enhancing customer interactions. The panelists underscored the shift from digital transformation to a more holistic business transformation, highlighting the fruitful yet time-consuming adoption of fintech by large banks. The topic of tokenization, particularly in real-time cross-border payments and liquidity management, was identified as a hot topic, signaling a significant trend to watch.

Tokenization of Securities: The Future of Investing in Web3

Panelists:

• Mimi Vong, Co-Founder & CEO of Metafyed
• Geoff Kot, Managing Director of Financial Markets at Standard Chartered Bank
• Tom Huynh, Associate Director at PwC
• Josh Du, Head of Digital Assets at Animoca Brands

The experts predicted significant advancements in Real World Asset (RWA) tokenization over the next five years, emphasizing the need for robust regulation and trustworthiness to achieve mass adoption. They highlighted the potential of digital issuance of traditional money, foreseeing a blend of Central Bank Digital Currencies (CBDCs) and tokenized commercial money to enhance cross-border payments and operational efficiency. The panelists also touched upon the limitless possibilities of tokenization, envisioning a future where virtually anything could become an asset.

Digital Assets: How do Traditional Financial Service Providers Claim Their Seat at the Table?

Panelists:

• Adrian Clevenot, Associate Director and Digital Assets Market Lead at PwC
• Alex Manson, Head of SC Ventures at Standard Chartered,
• John O'Neill, Managing Director and Head of Digital Assets at HSBC,
• Roger Bayston, Executive Vice President and Head of Digital Assets at Franklin Templeton
• Scott Lucas, Managing Director and Head of Markets DLT at J.P. Morgan & Co.

The discussion highlighted the lessons learned from HSBC's Orion platform, emphasizing the importance of a clear approach to law, regulation, and the integration of digital money. The panelists also discussed the challenges and opportunities presented by custodial frameworks for digital assets, particularly in light of increasing institutional adoption. They underscored the need for product innovation and demand generation to drive the adoption of digital assets in the financial industry.

Financing the Future: Empowering Financial Institutions with Blockchain Infrastructure

Panelists:

• Ashutosh Goel, Co-Founder & CEO of xalts,
• Peter Brewin, Partner at PwC,
• Ronit Ghose, Global Head of Future of Finance at Citi Global Insights
• Alfian Sharifuddin, Head of Technology and Operations at DBS Bank HK & China

The discussion highlighted the current inflection point in tokenization, with large institutions beginning to engage with the technology. The panelists emphasized the need for regulatory and legal frameworks to catch up with technological advancements, as well as the importance of workforce training and education. They also discussed the challenges and opportunities presented by the integration of blockchain technology with existing financial systems, predicting a gradual yet real adoption of tokenization in the financial industry.

Digital Transformation in Wealth Management: Digital Finance Disruptors and Wealth Tech Trends for 2023

Panelists:

• Carol Wu, Head of Private Banking at DBS Bank
• Hokee Fu, Partner at PwC
• Sami Abouzahr, Head of Investments and Wealth Solutions at HSBC
• Amanda Ong, Country Manager at Arta Finance

The discussion underscored the predominantly human nature of wealth management, highlighting the increasing role of AI in operations, strategy, risk management, and client interactions. The panelists emphasized the centrality of technology in enhancing efficiency, customer experience, and investment accessibility. They also discussed the challenges and opportunities presented by disruptive developments in the industry, emphasizing the importance of emotional connection in wealth management.

How are the Emerging Technologies Impacting the Wealth and Asset Management Industry?

Panelists:

• Steffanie Yuen, Managing Director at Endowus
• Everett Leonidas, Head of Investments APAC at Citi Ventures
• Steve Zeng, Head of Global Strategy & Development and Head of Wealth Management Business at Futu Holdings
• Enoch Chan, Partner at McKinsey

The discussion highlighted the transformative power of digital technologies in breaking down barriers and enhancing accessibility in the industry. The panelists emphasized the importance of trust, transparency, and the future of fund distribution, predicting a shift towards direct access to individual alternative assets. They also discussed the challenges and opportunities presented by the integration of emerging technologies in the industry, emphasizing the need for education and regulatory frameworks to support the transition.

Conclusion:

The Hong Kong FinTech Week 2023 provided invaluable insights into the future of finance and technology, highlighting the transformative power of digital assets, blockchain technology, and emerging technologies in reshaping the industry. The discussions underscored the importance of regulation, education, and innovation in navigating the evolving financial landscape, setting the stage for a future where finance is more accessible, efficient, and connected.