This course "FinTech Security and Regulation (RegTech)" help you to understand RegTech and to become more confident and persuasive in your ability to analyze and make recommendations to executives within the finance industry regarding how to react to these changes, e.g. Regulations to cryptocurrencies like BitCoin & Initial Coin Offering (ICO). It presents the views of several professors from the top business school in Asia as well as perspectives from industry professionals. You will learn about how FinTech and RegTech disrupt and transform finance industry, such as challenges in protecting data and security with digital forensics, risk management and corporate governance in banking industry in terms of Know Your Customer (KYC) and Anti Money Laundering (AML), and how governments in different countries take initiatives in FinTech and RegTech.
2.3 Interview with the Chief Operating Officer of HSBC Asia Pacific about RegTech
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FinTech Security and Regulation (RegTech)
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The Hong Kong University of Science and Technology
11 classificações
Curso 2 de 4 em Specialization FinTech: Finance Industry Transformation and Regulation
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Risk Management & Government Control
In this module, we explore some of the tools government use to regulate financial markets and discuss potential challenges for FinTech innovators in complying with these regulations. Some basic terms commonly used in finance such as AML & KYC are defined and described. We examine the role of different government agencies as well as alternative social objectives that influence the development of regulations over time.
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Theodore Henry King CLARKAssociate Professor
Information Systems, Business Statistics and Operations Management Department
In today's session,
we have a guest visitor coming in to talk from the perspective of HSBC,
Raymond, Chief Operating Officer of HSBC, here visiting with us today.
And we're going to talk a little bit about RegTech and regulation in general and
some other challenges for banking. >> Yes.
>> How important is regulation in finance?
>> To me,
the way I see the financial services,
we are basically a services, okay? >> So it's very fundamental.
[CROSSTALK] >> Very fundamental.
And we absolutely have to comply with regulations.
We have to do well, for regulations.
This is one of the top priority for us. >> Some people have said that part of
what's driving Fintech,
is these entrepreneurs don't have to comply with regulations.
And so they'll be able to get around large banks.
How do you react to that? >> There are different cases.
There are some financial services in the offer of Fintech that they
do not meet the explicit compliance of the financial services.
But I'm saying that in the place of the Fintech firm nowadays.
And they understand the importance of complying to the regulations.
They talk to the regulators often, okay?
And in the vision to understand the regulations from the regulator,
they also try to influence the regulators with a new technology,
with a new FinTech technology as well.
So I say, the whole market globally, regionally, or
in Hong Kong, are evolving and improving. >> So
some early stage entrepreneurs may be able to exploit some loopholes.
But it's pretty clear the big Fintech firms,
the big successes are financial service firms.
They are regulated like any bank and so they're facing
many of the same constraints. >> Yes, they will say, again,
I wouldn't put it as constraints.
Some people see constraints, but
some people may see that this other may be constraint but
in this other day to day things that we have to do, that we have to comply with.
And sometimes it will give us business opportunities,
as well. >> Is regulation good or
bad? >> It's hard to say that.
If you ask me, I think all the regulations that's required is good.
But the fundamental principle is very important.
>> So rethinking regulation is
a good thing periodically? >> Yes.
>> Because technology
makes new things possible, new opportunities.
So that may be- >> I agree completely.
>> Worth re-thinking.
And some of what's happening in Fintech is
regulators are having to think about, how do we deal with new technologies in
new ways? >> Yes.
>> How do we regulate a block chain?
What is it?
What is a Bitcoin? >> Yeah,
exactly. >> What is an ICO?
What are these other things?
How do we regulate it? >> And to echo your point,
the financial institution, the market,
is thinking about when using to deploy this technology.
At the same time, we can trust a regulator.
They’re using all their energy and focus to work on,
to create the right regulation, to regulate.
So that we can deploy this technology safely into the society.
>> And safely into society is kind of
a concern when we keep having bank failures.
And we keep having financial crisis, not just the 2008 one.
I mean I've lived through a multiple of these crisis of different
magnitudes and types.
And so we've got booms, bus crash problems of different types.
Some technology related, some real estate related, some lending related,
some different things.
It seems like every time we de-regulate more
bank profits go up and then we have a crisis.
>> It's hard to say that.
Honestly it's hard to say that.
From my understanding.
My will I'm engineered background. >> Right, me too.
So that makes it [CROSSTALK]. >> So my will is, given the changes in
the whole world, particularly driven by technology and Internet, okay.
The things and
scenarios get more complicated. >> Right.
>> And different.
Like in the past,
in the banking products we only have savings account and current account.
And then with time deposit, okay?
But we evolve all the way to derivative, advising services.
So the whole world is changing and I would say improving.
And the regulations has to follow that, okay?
Now, we got thousands of banks, thousands of different companies in the world,
things happen. >> Okay, so our job is,
while we are developing and evolving, in the business world,
in the marketplace, in the banks and in the regulator, okay?
We're going to make sure that the risk of running all of them and
then have a big crisis, to be minimal.
Theoretically, we cannot eliminate that because it's a changing dynamic,
questions or it's not a fixed state. >> As an engineer, one of the things
I learned early on in engineering is if you can develop things that can have
positive feedback like a transistor you can have incredible performance.
So you can have great potential if you leverage things and
have positive feedback.
But without friction, or without some kind of negative feedback or
resistance, you have instability. >> Yes.
>> You end up with a system that
oscillates. >> Yes,
I agree. >> And
an oscillator is not a nice sound. >> Yes.
>> Or not a nice thing to have in
equipment. >> Yes,
yes. >> It can vibrate things to death.
It can destroy.
So we want the technology enhancement but
the regulation is sort of like the friction or
resistance that keeps us working. >> Yeah, exactly, I agree completely.
And hence the feedback. >> We need that feedback.
>> We need the feedback.
>> Not just positive but also negative.
>> Negative, okay, and
I'm using that analogy is we're going to make sure that
we manage the feedback well. >> Right.
>> If you do not manage your feedback
well- >> Too much feedback will kill your
system. >> Besides a negative feedback is very
annoy and we don't have to do it on a right way.
Then you oscillate and cause more problems.
>> And we don't like it always.
We don't like any negative feedback, but we need it.
>> We need it, exactly.
And, that's how, so it's hard to develop.
And so we go with if you elevate and then we expand our services.
And then we get negative and positive and we take it and then you improve it, and
then we move forward. >> Our university is sometimes called
the university of stress and tension instead of the university of science and
technology. >> I agree.
>> And some people view that as negative.
I view that as positive because I don't think you can have a high performing
system without stress and tension. >> I agree, absolutely.
And the same thing to the organization.
Okay, and globalization- >> So
you you have to keep challenging youself. >> [CROSSTALK] Keep challenging,
we've gotta keep that conflict, but for it to positive conflict.
And then we feed back- >> So
you're a great man, with a great history.
You still have to challenge yourself and reinvent yourself.
>> Reinvent yourself, exactly,
and then to generate feedback and
manage the feedback well. >> Good.
That's exactly the one I told you. >> There's another side of regtech that
some people focus on,
which is the huge opportunities in helping traditional financial
services to better manage regulations. >> Yeah.
>> How big is this RegTech compliance,
RegTech software, RegTech services business?
>> The opportunities are huge.
Opportunities are huge.
That's why because we are have been using,
I would say standard regulation technology, or
standard technology to manage regulations. >> Sort of in the back end?
>> Yeah, sort of in the back end.
And also we have been using a new manual process to mix with that we comply
with the regulations, and we do both. >> So automating is a good thing.
>> Yeah, automating is a good thing.
Now we're getting into the next era on direct path,
which is using AI with data and cloud services and so on.
It create much more intelligence for us, okay?
To come into our operations, okay?
To ensure us, to verify us that we are meeting the regulations.
>> Yeah we'll just do that.
>> So for example our compliance on
ending money laundering. >> Yeah.
>> Okay, so
we have to do a lot of automated check as you say.
And also manual check and so on.
Now on checking on customer transactions.
Customer transacting behavior and pattern, and so on, okay?
Now, with the new red tag or
emerging red tag we can leverage on AI technology, we can leverage on big data.
Now we can get a more data and
the data like to do that analysis. >> Okay.
>> Okay, so this is one big enlargement.
>> So we still comply
with the regulations but we can do it more efficiently, more effectively.
>> More effectively and
more intelligently because the [INAUDIBLE] parties are getting smarter and
smarter everyday. >> That's good.
What the government wants is for you to stop money laundering.
>> Yeah, absolutely.
We have to stop and prevent. >> But
they don't want you to do paperwork. >> This is the worst case scenario.
We will go there.
We would be more automations.
We'll be much smarter.
We'll be using of computer and technology. >> And with that,
you can know your customers.
You can do anti money laundering, but you can be less intrusive in the process.
>> Exactly, exactly, and
then we will offer much better customer service to our client.
And, more individual service to individual clients.
>> Here's an interesting data point,
this customer service side is a group of millennials were asked a survey.
Would you rather go to the bank, to a loan officer to review your loan documents?
Or would you rather go to the dentist to a cavity filled?
And most young people said they'd rather go to the dentist.
>> [LAUGH]
>> Because the documents are so thick and
so hard to understand.
Facebook was testifying before US Congress.
And one of the comments was Mark Zuckerberg,
could you redo these customer service terms and conditions?
Because nobody can read this.
I challenge anyone to go through this and say what does it say.
They say, rewrite it in English. >> Yeah.
>> So that's a problem.
>> That's a problem.
I would say that's a challenge, and it post quite some opportunities for
banks. >> Yeah, yeah.
>> So the first thing is, generally
the banks, directly be from the regulations.
And also we want to protect the customer as
well. >> Yeah, yeah.
>> However, the way that we deliver,
the way that we interact hasn't do it in a small way.
Or we can improve the way that we do it, and also, we've got to understand
the primary objective of doing that, so that we are able to protect each other.
But the current way is a very long T&C
descriptions. >> Yes
>> A lot of normal people read through and
don't understand what they're talking about.
>> And the danger is we may have all of
those terms and
conditions to protect ourselves because of uncertainty and ambiguity.
And we want to make sure we're protected against anything.
But the problem is that a judge may say the principle of the law
is that ambiguity is decided against the issue of the contract.
By making it so long, it's ambiguous and it's not fair to the customer, so
they don't understand what they read.
Shoot.
You might have protected yourself sort of, and all the legalese, but
if it's not readable, the judge may rule against you because it's not easy to read.
>> Exactly, and
because of the complexity of the services, to get all the technologies,
using T&C, and different channels right?
They are a different situation that we do tough love, okay?
So I do see these huge opportunities for the market, for the regulators,
for the Vintech company to disrupt it. >> Right.
>> To come a better way.
You know to deal to customer.
Banks like us are more than happy to invest, continue to invest,
to improve in this area. >> That's good.
Okay, well, thank you very much for that.
We will look forward to having you illuminating students and
working with us. >> Any time, thank you.
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