This photo taken on July 8, 2022 shows a general view of commercial and residential buildings at Futian district in Shenzhen, in China's southern Guangdong province.
(PHOTO / AFP)
HONG KONG – Over 90 percent of financial institutions in the Hong Kong Special Administrative Region consider cross-boundary payment and settlement systems as essential in their Greater Bay Area outreach activities, according to a report released on Tuesday.
The Hong Kong Institute for Monetary and Financial Research, the research arm of the Hong Kong Academy of Finance, issued the report, which also showed that many of these institutions will expand their involvement in cross-boundary investment schemes in the next two to three years.
The report noted that Hong Kong has developed a set of multicurrency and multi-dimensional payment and settlement systems that are connected with the financial market infrastructures of other GBA cities to support cross-boundary financial services
“By illustrating the importance of cross-boundary payment and settlement systems in the GBA and highlighting benefits and challenges shared by market participants and the implications of emerging technologies, we hope that this report provides useful insights that help the financial services industry and regulators in Hong Kong to further deepen financial integration in the GBA," said Kwok Kwok-chuen, Executive Director of the HKIMR and Chief Executive Officer of the AoF.
The HKIMR commissioned a survey and interviews from July to October 2022 on local financial institutions’ views on the challenges of cross-boundary payments and settlements and how these challenges can be mitigated using technologies and related initiatives.
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“Over 90 percent of surveyed financial institutions in Hong Kong highlighted the importance of cross-boundary payment and settlement channels to their GBA outreach activities,” the report reads.
“Most of the surveyed banks, insurers, and asset managers intended to expand their involvement in cross-boundary investment schemes in the next 2 to 3 years. This demonstrates the essentiality of cross-boundary payment and settlement channels in supporting financial institutions’ outreach activities within the GBA going forward,” it added.
The report noted that Hong Kong has developed a set of multicurrency and multi-dimensional payment and settlement systems that are connected with the financial market infrastructures of other GBA cities to support cross-boundary financial services.
At the front end, financial service providers have implemented various retail payment methods within the GBA, including a cross-boundary electronic bill payment service allows customers in Hong Kong to make bill payments to merchants in Guangdong.
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At the back end, cash settlement systems in Hong Kong, namely Clearing House Automatic Transfer Systems (CHATS), are linked with the rest of the GBA to settle cross-boundary remittances.
These linkages guarantee the smooth exchange of goods and services across the boundary, according to the report.
Emerging technologies
It also noted that emerging technologies are being adopted to enhance Hong Kong’s financial market infrastructure and strengthen financial integration within the GBA.
These technologies include blockchain, artificial intelligence (AI)/Big Data (BD) technologies, digital identity technologies, electronic wallets, and data-sharing techniques.
According to the report, blockchain can improve cross-boundary financial services by ensuring the accuracy and traceability of recorded data.
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E-wallets are a low-cost technology that increase the accessibility of cross-boundary payments, and some Hong Kong-based e-wallets can now be used for shopping and dining in mainland GBA cities, it added.