At Regtech Demo Day on March 3 and 4, seven of Cyberport’s fast-growing regulatory technology (regtech) startups showcased their latest fintech solutions to hundreds of industry stakeholders.

The two-day event, organized by Cyberport and the Hong Kong Institute of Bankers (HKIB), sought to provide a platform for young, promising regtech startups to connect with potential prospects, and showcase the latest technologies out there to help banks and financial institutions manage compliance in an ever-changing regulatory landscape, Cyberport’s Chief Public Mission Officer Eric Chan told Fintech News Hong Kong in a statement.

Regulatory expectations have consistently increased over the years, and new rules continue to be released. Complying with regulations is becoming an increasingly complex, cross-functional effort that’s costing banks in Asia Pacific (APAC) an estimated US$6.09 billion annually, according to a study by a business research and risk management services provider LexisNexis.

The catalyst for turning this around is technology, Ray Horan, CEO of Hong Kong-based regtech startup Emotics, told Fintech News Hong Kong. Advances in areas including cloud computing and artificial intelligence (AI) are presenting an opportunity to reduce overall costs of compliance, lower risks and improve customer experience, he said.

Horan’s startup Emotics analyzes engagement with online content. Combining browser analytics with facial recognition and micro-expression analysis, Emotics provides insights into employee behavior with use cases ranging from compliance training to conduct surveillance.

With COVID-19 shifting customer interaction to online channels, banks in Hong Kong are embracing digital onboarding and electronic know-your-customer (eKYC) solutions, Horan said, a trend that’s been coupled with increasing demand around messaging solutions in light of the rise of remote work.

In addition to that, increased international focus on money laundering will drive demand for transaction monitoring solutions that can automatically identify suspicious transactions, while reducing false positives that require human intervention, he predicts.

Emotics was one of the seven start-ups that presented during Regtech Demo Day, alongside Chekk, a digital identity specialist that provides end-to-end KYC solutions for seamless onboarding of business and retail customers and accurate verification.

For Benjamin Petit, Co-founder and Head of Business Development at Chekk, regtech adoption can help Hong Kong to maintain its position as an international financial centre and preserve the banking sector’s attractiveness.

Recognizing that, the Hong Kong government and regulators have launched numerous initiatives to encourage regtech innovation, raise awareness and boost adoption, he said, citing the Fintech Proof-of-Concept (PoC) Subsidy Scheme administrated by Cyberport as a key move. The scheme, launched in February 2021, grants selected PoC projects with up to HK$150,000 each. The government has earmarked HK$10 million for the scheme.

In particular, Benjamin said the Hong Kong Monetary Authority (HKMA) has been proactively encouraging the development of regtech, and has vouched to work closely with the banking industry and the regtech community to improve collaboration.

This supportive stance, coupled with Hong Kong’s vibrant startup ecosystem, makes the region poised to become a leader in regtech innovation.

“Hong Kong is probably one of the most business-friendly places and the tech scene has become more and more vibrant over the past year,” Benjamin told Fintech News Hong Kong. “Fintechs benefit from a great ecosystem including Cyberport, the Regtech Association and the Fintech Association, and regulators and authorities that are proactively supporting regtech adoption amongst banks and financial institutions.”

After establishing itself as one of the world’s largest fintech hubs, Hong Kong is now on a quest to becoming a leader in regtech.

At the 2020 Hong Kong Fintech Week last November, the HKMA unveiled a two-year roadmap to promote wider adoption of regtech in the region’s banking sector. Some of the key initiatives under the plan include a flagship regtech event to be hosted by the HKMA sometime this year, the launch of a regtech challenge in H1 2021, and the establishment of a regtech knowledge hub and regtech adoption index scheduled in H2 2021.

These efforts have contributed to the rapid growth of Hong Kong’s regtech ecosystem. According to a 2020 study conducted by the Regtech Association of Hong Kong found that the number of regtech companies in the region has increased ten times in the last five years, with about half of these companies being start-ups with less than two years in operation.

Carrie Leung, Chief Executive Officer at The Hong Kong Institute of Bankers, said,

“We are going to launch a series of events on RegTech allow banking practitioners to better understand the regulatory requirements and discuss the latest technology development, helping the banks meet regulatory requirements while reducing costs and increasing efficiency. The RegTech Demo Day launched in partnership with Cyberport is a litmus test to connect banks with RegTech start-ups. We believe the PoC Subsidy Scheme is a good incentive to promote the partnership between them.”

Besides Emotics and Chekk, other startups that presented during Regtech Demo Day include RISKflo Asia, a provider of governance, risk management and compliance solutions, Regtics, a start-up that incorporates big data analytics, AI and machine learning (ML) into compliance solutions, FundingReach, a platform focusing on risk mitigation, LeapXpert, the provider of a platform enabling compliant and secure omnichannel communication between companies and their clients, and TESS Asia, a start-up that focuses on developing and customizing new Anti-Money Laundering (AML)/Counter-Financing of Terrorism (CFT) monitoring systems.

Financial institutions and fintech companies interested in cooperating with one another can apply for the Fintech PoC Subsidy following this link. Applications may be submitted from February 26, 2021 till June 30, 2021.

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