• Forced to adapt quickly, Hong Kong’s banking and financial services industry has hastened its adoption of digital transformation and AI in the name of survival, supported by a rapidly evolving regulatory environment

Andy Chun

 

Covid-19 has changed consumer behaviour forever and Hong Kong’s banking and financial services industry urgently needs to adapt. Digital transformation with artificial intelligence has quickly become the top priority for those not wanting to be left behind.

The pandemic has prompted a struggle for business survival, forcing innovation and digital transformation as many businesses suddenly found themselves at a loss without their physical sales and distribution channels.

The world witnessed the near-overnight adoption of work-from-home arrangements, Zoom meetings, food and grocery deliveries, online banking, investment and insurance, cashless payments, and virtual events such as webinars. Although Hong Kong’s finance industry has already embarked on its digital transformation and AI journey, many were not far enough along when Covid-19 hit. Early adopters, however, are reaping the rewards.

Last year, Hong Kong’s banking and financial services industry saw growth in AI awareness and understanding, and the development of new AI and data capabilities in key focus areas such as chatbots, robo-advisers and automation with robotic process automation (RPA). These paved the way for solutions to Covid-19 problems such as reduced staffing in the frontline and customer service centres.

With Covid-19, chief experience officers have reprioritised their digital transformation plans and shortened timelines. Companies which already have chatbots and RPA systems are making them more sophisticated.

Newer chatbots will be context-aware and more human-like. Robo-advisers

in the coming year will also be more intelligent and there will be more expansive use of RPA across organisations in mundane, routine tasks. Chatbots and robo-advisers may be further integrated with RPAs for fully digital self-service processing.

Many believe this new normal is here to stay, and companies unwilling or unable to adapt will be displaced. The convenience of online banking and investment trading, together with online shopping and food delivery may have a lasting impact on Hong Kong consumer behaviour and retail strategies.

The Hong Kong Monetary Authority, Insurance Authority and other regulatory bodies have been quick to create guidelines to support the demand for digital services. For Hong Kong’s financial institutions, Covid-19 will propel growth in AI technologies such as biometric facial recognition and electronic “know your customer” for remote account opening and onboarding, as well as AI fraud-detection.

Because of Covid-19, companies are also rushing to offer more fully digital products, with no human intervention. These require extensive AI use to personalise the products and services offered, automate underwriting and scoring/rating, and generate dynamic and personalised pricing and content. We will probably also see more chatbots used in support and servicing, invoking associated processes with RPA, in transactions such as claims processing.

Digital companies have an advantage in coping with situations such as Covid-19. The launch of virtual banks and insurers are major milestones for Hong Kong’s financial services industry. I expect the development of virtual banks and insurers to further drive AI development in Hong Kong across the industry.

There will also be increased AI use in digital marketing and customer acquisition. With the enormous data available, AI can perform big data-driven marketing campaigns that pinpoint the right products to offer to the right persons at the right prices and time in their life.

Hong Kong is also advancing rapidly in the understanding and governance of AI ethics and related issues. Last year, the Monetary Authority released guidelines and principles relating to AI and governance, accountability, fairness, transparency, data privacy, etc. The Securities and Futures Commissions has also issued guidelines on the use of AI algorithms and robo-advisers. In 2018, the Office of the Privacy Commissioner for Personal Data released the document “Ethical Accountability Framework for Hong Kong”. Much groundwork has been established but more work remains as this area of AI development evolves globally.

As more tasks are delegated to AI post Covid-19, governance issues will become increasingly important, particularly around potential AI biases in decision-making. Last year’s Apple Card launch, for example, was dogged by suspicion of gender bias in its AI credit scoring algorithm. Companies need to carefully examine the data used in machine learning.

This pandemic experience will transform Hong Kong’s financial services industry permanently and push digital transformation and AI. As a leading financial centre, Hong Kong has taken aggressive advantage of new technologies. Covid-19 has made this digital transformation and AI more of a necessity for many companies.

Andy Chun is an adjunct professor at City University of Hong Kong and council member and convenor of the AI Specialist Group at Hong Kong Computer Society

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