This annual update forecasts developments and trends affecting Hong Kong’s banking sector in 2019.

While Hong Kong’s banking sector is more resilient due to the strengthening of regulations over the past decade, the level of change, disruption and competition in the industry over the next few years will raise new challenges for banks.

The report notes that the successful banks in the coming years will be the ones that truly put their customers front and centre of their business strategy, and harness the power of data to achieve this. Technology will be a key enabler for banks to realise value from their data and become more customer-centric, as well as to improve how they deal with regulation and compliance issues.

While regulation will continue to be a key driver of change in Hong Kong’s banking sector, there is expected to be less prudential regulation and a greater focus on conduct, and how banks treat their customers.

We believe that investing in data and technology to build up management information will make a demonstrable difference to improving a bank’s management of conduct risk. While much of this information has traditionally centred around lagging indicators, we expect more banks to identify and define leading behavioural indicators such as trading patterns, sales spikes and certain complaint trends.

This 2019 outlook shares a number of opportunities for banks to grow and succeed by embracing fintech, artificial intelligence, blockchain and data analytics, as well as through the Hong Kong Monetary Authority’s Smart Banking Initiatives, including the Faster Payment System and the Open Application Programming Interface Framework.

While leading banks will leverage emerging technology and become data-driven enterprises, this also increases risks and the impact around data protection and cybersecurity.