Hong Kong Monetary Authority implements data strategy

By Sunniva Kolostyak

The Hong Kong Monetary Authority (HKMA) is introducing the Commercial Data Interchange (CDI), a new strategy to evolve with the ‘paradigm shift’ of data, its CEO said at Hong Kong FinTech Week.

In the opening keynote of the 2020 conference, Eddie Yue, JP, Chief Executive of HKMA, said Hong Kong is embracing a new era of smart banking while ensuring a level playing field for diversity and innovation in financial services, across both traditional and digital platforms.

By launching the new market development initiative CDI, HKMA is establishing a consent-based common standard for the data owners to share their digital footprint with banks through the data providers using a single connection.

Data will enable the three core principles of good banking – good service, great trust, and efficient capital management, Yue said.

“Data analytics is pivotal in customer authentication, credit assessment and also compliance monitoring. In fact, data is key to almost every banking function. It is perhaps the most powerful tool for delivering the timeless principles.”

He said: “This new data strategy is a paradigm shift in the development of Hong Kong’s financial infrastructure. We have always facilitated the secure movement of funds through our robust clearing and settlement systems. Now, we will also be facilitating the secure movement of data at the initiation of the data owner to enable more efficient financial intermediation in the banking system.”

Financial institutions and data providers will be able to connect their own systems to the data interchange so that the end-customer can authorise its own service providers – including utility companies and payment gateways. With the customer’s consent, banks will have direct and efficient access to a substantial body of data, enabling them to offer better and more suitable services to customers, and perform more precise and objective credit assessments.

Yue explained that the CDI will address current issues in financial services concerning data. More data means more analytical tools, but rich data is scattered across sectors and entities, making them hard to access and verify as they are moved between providers and banks via bilateral one-to-one connections without protocols and standards.

This makes it hard for bankers to collect holistic information, creating impediments to their ability to serve customers. As a result, customers, and particularly SMEs, are having to take out loans which may require collateral due to assessments being made using old data.

Import and export could also benefit from the platform, he added: “Through the CDI, they could authorise the trade servicing platforms to allow their banks to access reliable trading data. And that should help the banks understand these customers’ trade counterparties. And in turn, that can reduce money laundering and risk. […] Access to financing should improve and their cost of borrowing should fall.”

The Hong Kong Monetary Authority’s CDI platform will be subject to governance and consumer protection measures.