HKMA reinvents digital finance with the CDI
A year after the introduction of a consent-based data sharing platform Commercial Data Interchange (CDI), the Hong Kong Monetary Authority (HKMA) last month shared a few proof of concept cases successful during FinTech Week 2021. These cases demonstrate the transformation of banking operations and present new digital opportunities for Hong Kong businesses.
Designed to enable more efficient financial intermediation in the banking system and improve financial inclusion in Hong Kong, CDI is a neutral and secure platform for sharing alternative financial data between banks and data providers when owners data (i.e. companies, SMEs or individuals) give their consent.
For banks, it is about assessing the risks
To demonstrate the business value of CDI, HKMA shared proof of concept cases that transform the traditional model of banks’ credit scoring via alternative data to reduce costs and speed up the loan approval process. for SMEs.
“The risk and cost of lending to SMEs was previously high for traditional banks,” Zanjun Xu, deputy general manager of the commercial banking department of Bank of China (Hong Kong) Limited, told FinTech Week 2021. She explained that banks “use the same risk assessment mechanism that allows companies to review the operations of SMEs with smaller loans.”
Xu said that most SMEs might not have a well-equipped financial system to provide adequate financial data. Thus, it costs more time and resources for banks to review, verify and analyze data for risk assessment. The CDI gives access to more operational and up-to-date data, giving banks “a better image of SMEs to understand their potential growth,” she said.
“It also allows banks to better compare the operations of SMEs within the industry, giving banks a different perspective to assess risk,” said Ryan Fung, Managing Director of Ping An OneConnect Bank (PAOB), at the same event. .
For SMEs, this removes the current pain points
Fung added that the CDI also solves the financial problems of SMEs, especially in opening bank accounts or accessing loans.
In an effort to make these banking services more accessible for SMEs, Fung said PAOB participated in the CDI proof-of-concept exercise and partnered with TradeLink, a government e-commerce service provider (GETS ). GETS is an electronic services platform that enables the business community to submit documents to the Hong Kong government for the purposes of customs control, trade declaration, trade control and compilation of statistics. With its consent, TradeLink will provide similar information to PAOB, supporting its credit assessment processes.
Fung said TradeLink provides trade data as recent as 14 days, providing updated and validated information to the bank to create credit scoring models.
A similar model has been designed to provide trade finance solutions to SMEs by partnering with GS1 Hong Kong and accessing its data, said Winnie Tung, managing director and head of corporate banking, Standard Chartered Bank ( Hong Kong) Limited.
GS1 operates the B2B ezTRADE platform, containing the digital transactions and sales records of nearly 2,000 companies in Hong Kong and China in the retail, FMCG, cosmetics, personal care industries. health, food and food service. Tung said ezTRADE members can consent to share their data on the platform with Standard Chartered Bank for financial health analysis, which facilitates collateral or financial statement requirements to access services. trade finance.
Another example is the partnership between HSBC and HKTV Mall, where merchant data, including turnover and reimbursement records of different types of merchandise, can be shared with HSBC with the merchants’ consent to analyze and forecast. business performance during the credit assessment and monitoring process.
For traders, they can take advantage of BNPL
The value of CDI goes beyond access to loans, said Peter Koo, partner, risk advisory, APAC leader, IT and specialty insurance at Deloitte Touche Tohmatsu.
He said another important opportunity for CDI, especially for retailers, is to enable the rise of Buy Now, Pay Later (BNPL). Targeting Gen Z consumers or customers with no extended credit history, BNPL is the emerging payment option supported by point-of-sale installment loans.
Also transforming the traditional credit assessment process, BNPL providers aim to provide short-term, interest-free financing for consumers without a credit card. But in Hong Kong, BNPL is available with limited options, including livi PayLater or e-Mall Atom, to support small transactions ranging from HKD 5,000 to HKD 10,000. In order for BNPL providers to better manage risk or payment delays, Koo said they could use CDI to access individuals’ digital fingerprint data, with their consent, in building a business model. ‘Risk Assessment.
“BNPL is a very popular payment option for electronic shopping malls in China, and it’s starting to gain momentum in Southeast Asia,” Koo said.
He said CDI could support the rise of BNPL, which is expected to provide retailers and merchants with promising opportunities to tap into the Gen Z market and small families. CDI can also be the foundation for transforming the local banking system, enabling digital services similar to the open and vibrant banking market in Europe, Koo concluded.
Sheila Lam is the editor-in-chief of CDOTrends. Covering IT for 20 years as a journalist, she has witnessed the emergence, hype and maturity of different technologies, but is always excited afterwards. You can reach her at [email protected].
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