The Hong Kong Monetary Authority has announced a range of measures to encourage banks to work with third parties to promote financial technology.
Analysts welcomed the move but raised concerns about whether there are sufficient oversights for technology companies able to access customer information but not subject to regulation by the monetary authority.
The HKMA yesterday unveiled a regulatory framework on open application programming interfaces in the banking industry, which regulate how banks develop their computer software communication systems.
An open interface approach will enable third-party providers such as technology firms to develop new products and services.
This is a one of seven measures announced by HKMA chief executive Norman Chan Tak-lam in September last year to encourage banks to develop financial technology.
The HKMA received 41 comments from banks and technology firms during its public consultation that ended in March.
It requires all banks to work on application programming interfaces in four phases.
The first phase will start in the next six months and involves new ways for customers to compare deposit rates, foreign exchange rates and other publicly available information.
Technology companies taking part in this stage will only need to register with banks as no personal information about customers will be accessed.
The second stage, in 12 to 15 months, will need customer information in relation to credit card applications or online purchases of products such as insurance.
“Since third-party companies will start to access customers’ information, banks will need to set up agreements with these providers to make sure they have measures to protect client information and security,” said Howard Lee Tat-chi, a deputy chief executive of the HKMA.
The third stage involves allowing technology companies to access bank account balances and other sensitive customer data.
The final phase involves allowing technology firms to help make transfers and payments.
Lee said the HKMA was expected to monitor how the first two stages unfolded before setting rules for the next two stages.
Louis Tse Ming-kwong, the managing director of VC Wealth Management, urged the HKMA to add more measures to enhance customer protection.
“In Britain, the technology firms that help banks to develop their fintech products need to register with the regulator. The HKMA does not require technology companies to do so,” Tse said. “This does not look good enough … If these fintech companies commit any malpractice, it is not clear how the HKMA or other regulators will impose penalties.
“The HKMA should follow the example in Britain.”
Lee said while these technology companies were not regulated by the HKMA, they still needed to follow privacy laws and other regulations.
He also said the HKMA would offer 50 sets of data including Exchange Fund figures and monetary statistics on its website from July 23. An additional 80 sets of data will be available by the middle of next year.