Digital finance took centre stage at Hong Kong’s annual Asian Financial Forum as speakers discussed how economies and companies are using technology to adapt to the ever-changing circumstances around the Covid-19 pandemic.

Held over two days this week, the virtual event addressed a number of issues and trends facing the global financial industry today, and part of the discussions focused on the rapid development of virtual banking in Hong Kong.

For many of the online-only banks operating in the city, the past couple of years have been exciting yet challenging as they continue to study customer behaviours as a basis to offer more meaningful services.

“Using your mobile phone via the app, we can obtain a digital footprint whereby we can customize messages to you. We have standardized and automated the user interface, but we do customize the message with each customer based on your behaviour,” shares Rockson Hsu, chief executive officer of ZA Bank, the largest virtual bank in Hong Kong in terms of the number of customers.

Garnering about a million customers in Hong Kong since they launched their services in 2020, most virtual banks have yet to turn profitable. Hsu predicts at the AFF that most of the players in this banking segment should be profitable by 2024 with 2025 being a key year for most fintech strategies of these banks to materialize.

Insurtech, digital payment

Similarly looking to provide a better customer experience, players in the insurance sector also acknowledge the need to upgrade their legacy systems. Speaking at the forum, Alvin Kwock, co-founder of Hong Kong-based virtual pet insurer OneDegree, says: “I think the insurance industry has long been dragged down by the outdated legacy systems. You hear many issues around hardcoding the lack of flexibility.

“Each digital product iteration in insurance used to take about six to 12 months when it comes to working on a legacy system. For us it takes us 10 days to implement an iteration on the back-end. For one of our products, we have in fact made five iterations within 12 months’ time. That means you can improve the product five times based on the customer feedback and data and that becomes a crowd-sourced product and that is really powerful to have.”

The digital payment space continues to be a highly competitive market as international players look to provide value-added services for merchants operating in their ecosystem.

Chris Yeo, managing director, head of GrabPay & GrabRewards, at Grab Financial Group, notes: “The companies that stay around longer are the players that understand and serve their customer base. For example, our merchant customers during the course of the Covid-19 pandemic were [interested to know] how they could generate more sales. Payment players have to continue to offer a wider suite of products.”

Citing one his company’s initiatives, Yeo says GrabMerchant Commerce allows small offline merchants to start a webstore fast to be able to sell their products online, improve operations and reduce payment risks.

Crypto assets, metaverse

Speakers at the AFF also discussed developments in emerging technologies and their impact on current financial processes. Talking about the growing role of crypto assets in generating wealth, Michel Lee, executive president at digital asset financial services company HashKey Group, highlights: “What we’ve seen over the last 18 months is a big transformation with traditional investors such as hedge funds and family offices really moving into bitcoin and ethereum. You then have all the venture capital funds now really jumping into a lot of the platforms for digital assets. Twenty years ago, people had to buy tech stock shares to stay ahead in the tech game, now you really need to be in tokens in digital assets early in order to spot the next trend.”

This interest in digital assets has even spilled over to areas outside of finance such as the art industry, which many galleries and artists looking at non-fungible tokens (NFTs) as a way to authenticate ownership and ensure royalties are paid to the creator of the artwork when passed between parties.

“NFT is a technology that finally allows digital art to be transacted more safely,” says Francis Belin, president, Asia-Pacific, at international auction house Christie’s. “Definitely, NFT in the art space is here to stay and the reason why we see this explosion in that category is because all of a sudden, the technology is here.”

There was also animated discussion around the metaverse and what it could mean for organizations under current social distancing norms. While a few companies have ventured out into the metaverse – most recently H&M opened its first digital store – it will take some time before the trend pans out.

“The metaverse provides endless opportunities in the realm of sustainability, not only from a design and innovation perspective but also from a practical one,” says Adrian Cheng, chief executive officer of real-estate developer New World Development. “We are already seeing the metaverse as having potential to act as a solution for many environmental issues, like reducing the need for travel, through improved remote working practices as well as vacation, sightseeing world landmarks and cultural experiences brought to life in the virtual world.”