2021 FINA5260 - Lesson 1 v1.0

FINA 5260
The Future of Financial Industry
Prof. Hilton Chan, PhD

Adjunct Professor, Finance Dept
School of Business and Management
Hong Kong University of Science & Technology
Class 1
Overview of FinTech, InsurTech and
RegTech
Copyright 2021 © Prof. Hilton Chan 2

Agenda
1. History of Financial Technology (FinTech)
2. LoNG PESTEL and BITD analysis
3. Global Trend and Government Initiatives and
Policy
4. Case analysis – “Comparing the FinTech Sandbox
between Hong Kong, Australia, Malaysia,
Singapore and the UK”
5. Business Strategy and Disruptive Innovation
6. Future Directions of FinTech Disruptions
7. Fruit for Thought
What is FinTech (Financial Technology)?
FinTech is the delivery of innovative financial products
and services through the application of technology , to
make financial systems more efficient.
(source: http://www.slideshare.net/SGFinTech/singapore-fintech-consortium-introduction-to-fintech)
An economic industry composed of companies that use

technology to make financial systems more efficient.
(source: http://www.whartonfintech.org/blog/what-is-fintech/)
FinTech is shorthand for ‘innovation in financial services’.

(source: http://www.ndrc.ie/2014/03/fintech/)

What is FinTech (Financial Technology)?
FinTech companies are generally startups founded with the
purpose of disrupting incumbent financial systems and
corporations that rely less on software.
Global investment in financial technology increased more than
2,200% from $930 million in 2008 to more than $22 billion in 2015
According to the office of the Mayor of London, 40% of London's
workforce is employed in financial and technology services. Some
of the better-known FinTech companies in London include
FundingCircle, Nutmeg and TransferWise.
In the United States, there are a numerous FinTech startups,
including several of the best-known companies, such as
Betterment, Lending Club, Prosper, SoFi, Square, SoFi and Stripe
(along with others, such as LOYAL3, MaxMyInterest, Robinhood
and Wealthfront).
(source: https://en.wikipedia.org/wiki/Financial_technology)
LoNG PESTEL (macro perspective)
We shall conduct FinTech case analysis using the
LoNG PESTEL model.
Local National Global
Political √ √ √
Economical √√√ √√√ √√√
Social √√ √√ √√
Technological √ √ √
Environmental √ √ √
Legal √ √ √

“BITD” analysis (micro perspective)
BITD analysis helps us to understand and assess FinTech
developments in four key areas: Business ideas and models,
Innovative Integration with Technology in computing and
communication, and Data analytics and management are the
fundamental building blocks.
Market
Business Assessment
(ideas & models)
(Consumers)
Innovative New FinTech

Integration Applications
Technology Data
(computing & (analytics and
communication) management)
7
Copyright 2021 © Prof. Hilton Chan
FinTech adoption rate
2017 % 2019 %
China 69% China 87%
India 52% India 87%
UK 42% Russia 82%
Brazil 40% South Africa 82%
Australia 37% Columbia 76%
: :
US 33% Hong Kong 67%
Hong 32% Singapore 67%
Kong
Singapore 23% Canada 50%
Canada 18% US 46%
Japan 14% Japan 34%

A simplified view of banking and
finance

A simplified Banking and Finance model
Operators Participants
Exchange
Bet on
Goods/
Financial
future
events
Services pool of $$$
Operators
Regulators Copyright 2021 © Prof. Hilton Chan 10

FinTech, InsurTech, RegTech -
Democratization? Efficiency?
FinTech/Insurtech Participants
Exchange
Bet on
Goods/
Financial
future
events
Services pool of $$$
FinTech/Insurtech
Regulators RegTech
History of FinTech

History of FinTech

History of FinTech
1950’s
• Use of Credit Cards
1960’s
• ATMs
1970’s
• Electronic stock trading systems
1980’s
• Mainframe computers (AS400)
1990’s
• Internet and eCommerce
2000’s
• Online banking and trading
History of FinTech
1950’s
• Use of Credit Cards
1960’s
• ATMs
1970’s
• Electronic stock trading systems
1980’s
• Mainframe computers (AS400)
1990’s
• Internet and eCommerce
2000’s
• Online banking and trading
History of FinTech
1950’s - Use of Credit Cards
1960’s - ATMs
1970’s - Electronic stock trading systems
1980’s - Mainframe computers (AS400)
1990’s - Internet and eCommerce
2000’s - Online banking and trading
From 1950 to 2014, the number of bank branches in US grew from 18,000 to
over 82,000.
The banking sector was NOT threaten. Why?

History of FinTech
Let’s take a look at the business applications of the information
communication technologies (ICT) in the 21st century
• Mobile wallet and crypt-currency
• Payment apps
• Robo-advisors, Robo-traders
• Equity crowdfunding platform
• Online lending platform
• Direct remittance
ICT
• IoT, Big data (time series DBS), data analytics, profiling & risk analysis,
sentiment analysis, AI/machine learning, PKI, blockchain, distributed
ledger technology, APIs, digital forensics

History of FinTech
Let’s take a look at the business applications of the information
communication technologies (ICT) in the 21st century
• Mobile wallet and crypt-currency
• Payment apps
• Robo-advisors, Robo-traders
• Equity crowdfunding platform
• Online lending platform
• Direct remittance
ICT
• IoT, Big data (time series DBS), data analytics, profiling & risk analysis,
sentiment analysis, AI/machine learning, PKI, blockchain, distributed
ledger technology, APIs, digital forensics

Why banks? Any other banking services
providers?

Why do we need banks?
Barter
IOU; promissory notes
Sea shell; bronze; gold
Banknotes; Currencies
Deposit & withdraw services; lending services; interest → Gov’t regulation
Banks = trusted third party (TTP)

Why FinTech in 21st century is a threat to banks?
The Role of Banks
• Banks collect deposits and make loans, while also facilitating
payments and currency exchange. In most developed countries,
the majority of households have at least one bank account.
• But this isn’t the case everywhere. In under-banked or un-banked
regions, primarily in parts of Asia and Africa, many individuals
hold their life savings in cash, without bank accounts.
• In developing countries, banking penetration is approximately
41%, compared to 89% in developed countries.
• In India for example, the country has approximately 102,000 bank
branches for a population that is roughly four times that of the
U.S., which has approximately 82,000 bank branches.

• Fintech startups that offer secure mobile wallets and payment
apps are offering banking for the unbanked.
• M-Pesa is probably the most successful example of such an app.
In Kenya, the company touts a very strong user base, and the
mobile wallet has become a daily used utility for purchases. This
eliminates the need for a bank account among those users who
don’t have complicated finances.
• Similar fintech apps may become the de facto savings pool for
those without a bank account.
• This type of dynamic allows smaller fintech startups to play the
role of banks, by helping people to borrow, spend and pay using
mobile apps and websites, bypassing banks altogether.

• In the U.S., fintech apps such as Venmo and Apple Pay provide
convenient and secure payment methods. They are faster and
cheaper than transferring money between bank accounts and
using checks.
• Lending platforms such as Lending Club and Prosper, provide
lower interest rate personal loans with a maximum limit of
$35,000.
• Robo-advisors are providing an alternative to traditional financial
advisors. Companies such as Betterment or Wealthfront provide
a data driven automatic investment plan for retirement planning
and wealth management.
• All of these fintech companies are strong contenders who are
increasing their market share and competing with retail banking
services.
• But the truth is, banks accounts are still where paychecks get deposited.
The deposit base sits with a bank, where it funds payment apps, loan
payments and investment accounts.
• Banks provide a level of insured safety when deposits are too large to
practically sit in mobile wallets. Is this still true?
• Eventually, as people buy homes, buy cars and pay for college, their
financial needs become more complicated and require larger borrowing
limits. Is this still true?
• At some point, consolidating services through a bank account becomes
an attractive option.
• While there is no doubt that consumer focused fintech startups are
capturing market share through the efficiency and speed they offer, it is
difficult to imagine a future where banks completely disappear in
developed markets.

• Enhancing the traditional banking models? banking

services
• Replacing bank‘s services with smarter IT solutions
• More customer-centric (back to human to human
without an agent)
• Replacing the TTP (Trusted Third Party) role of the bank
• Banking from physical unit (paper notes) transfer to
digital unit (data) transfer
• ….

What will happen if ……. ?
“Trump has ramped up calls for negative interest rates.”
(2019-9-11)
https://markets.businessinsider.com/news/stocks/negative-interest-rates-explained-what-they-are-why-they-matter-
2019-8-1028516867

Source: https://venturescannerinsights.wordpress.com/2015/01/21/jan-2015-fintech-market-update/
FinTech Ecosystem
(Hong Kong)
https://fintechnews.hk/3745/various/finte
ch-hong-kong-need-know/

https://www.cbinsights.com/blog/disrupting-european-banking-fintech-startups/
Global Trend and Government
Initiatives and Policies

Still the uptrend or slowing down?

WealthTech
Wealthtech (wealth and technology) is one of the
subsections of fintech.
Wealthtech unites wealth and technology with the goal

of providing digital solutions to enhance personal (and
professional) wealth management and investing.
e.g. Robo-advisor, Robo-retirement, Digital Brokerage,
Micro-investment, ……
https://www.forbes.com/sites/margueritacheng/2019/02/19/the-future-of-wealthtech/#16e7eb7535e6

https://home.kpmg/xx/en/home/campaigns/2020/02/pulse-of-fintech-h2-19-wealthtech.html
https://www.statista.com/statistics/1096928/number-of-global-unicorns-by-country/
FinTech 1.0
• Digitizing the customer
experience and moving services
online
• P2P lending; New payments
• Operation efficiency
• Transactional
• Competition
• Focus on tactics

Transaction value (in USD million)

Copyright 2021 © Prof. Hilton Chan
41
FinTech 2.0
• AI, machine learning, open APIs, analytics, DLT/Tokenized economy/Sharing
economy,
• P2P lending; New payments
• Creating values
• Transformational; disruptive
• Collaboration with banks and others
• Focus on strategy

Factors driving Internet Finance in China
1. Banking for the unbanked

2. eCommerce and Internet companies are branching into
the finance sector, e.g. Alibaba’s Yu’E Bao, providing
integrated and value-add services
3. “1-click” away from other mobile services
-Allow customers of Alipay to invest their

idle Alipay account balances in a money
fund market as low as RMB 1 and redeem
the fund holdings at anytime to pay for
online purchases
-Customers can check their returns daily.

4. Traditional financial services are migrating to the
Internet
We Bank
-Online only bank (no physical location)
-Lending to SMEs using “Big data
analytic” in the risk assessment engine

Government Initiatives and Policies

Government Initiatives
1. FinTech advisory group
• Government, Regulator, Trade associations, Academia
and Business
2. Programme of grand challenges on FinTech for
academia, business and other stakeholders
• e.g. incubation or acceleration programs in HK Science
& Technology Parks and Cyber Port
• FinTech Innovation Lab (http://www.fintechinnovationlab.com/)
• FinTech Sandbox launched by the regulators
3. Automating regulation and compliance to create a
state-of-the art RegTech infrastructure
Singapore’s FinTech Journey
1. Innovation – to find better ways of doing things

2. Inclusion – to benefit as many people as
possible
3. Inspiration – there is hope in a better world
(http://www.mas.gov.sg/News-and-Publications/Speeches-and-Monetary-Policy-
Statements/Speeches/2018/Singapore-FinTech.aspx)

Singapore’s FinTech Ecosystem
6 key components
People
Identity
Payments
Data governance.
Applied research.
Platforms for innovation.

6 key components
People
– Without people – their skills, their energy, and their enterprise -
there is no FinTech.
Identity
– Establishing who we are dealing with and authenticating
information about that person is the first step in any digital
transaction.
Payments
– Swift, secure, and seamless payments are fundamental to a digital
economy.

6 key components
Data governance.
– We must ensure the responsible use of data and seamless and
secure flow of data.
Applied research.
– We need to build strong capabilities in FinTech-related research
directed at solving real-world problems.
Platforms for innovation.
– We need mechanisms to foster collaboration and co-creation ...
– … to translate ideas into products; bridge problems with solutions

Estonia’s digital identity
• Estonia: a country of 1.3m people in the north-east corner of
Europe, just south of Finland, just east of Russia.
• 99.8% of banking transactions done online, tech start-ups and
angel investment per capita to be the highest in Europe, and
digital public services to be the global standard.
• Widely considered to be among the world’s most vibrant
digital economies, entrepreneurship is endemic in Estonia,
energised by forward-thinking, liberal policies and an
exceptionally IT literate and highly educated society.
• A great enabler of advancement in the IT sector has been
digital identity, together with a willingness to accept digital
by default.

Trust and Functionality
• e-ID was secure and easy to use (two-factor authentication of e-ID)

• Security was further enhanced by X-Road – a network which pulls
together personal data from numerous decentralised databases
only upon an authenticated request.
• These requests can also be monitored so users know what, when
and why their data has been looked at.
• The combination of security and transparency has built a strong
basis of trust among users of Estonian digital services.
• From login to completion, signing a document digitally takes on
average 30 seconds; your tax return 5 minutes; incorporating a
company 15 minutes.

Trust and Functionality
• Furthermore, the ‘once only’ principle adhered to means

users never input the same data twice.
• Three core principles which can advance use of digital
financial services and the wider digital economy in Estonia:-
a) Identity,
b) Trust, and
c) Functionality.

Hong Kong’s FinTech Initiatives
1. Faster Payment System
2. Common QR code standard
3. Virtual banking
4. Talent list
5. APIs
6. HKMA sandbox
7. Securities and Futures Commission sandbox
8. Insurance Authority sandbox
https://www.info.gov.hk/gia/general/201809/12/P2018091201042.htm
https://www.scmp.com/business/banking-finance/article/2113369/hkma-sets-out-seven-
initiatives-effort-bolster-fintech
“Comparing the FinTech Sandbox
between Hong Kong, Australia, Malaysia,
Singapore and the UK”

Comparing the Sandbox Framework
(Class Discussion)
1. Australia
2. Hong Kong
3. Malaysia
4. Singapore
5. U.K.
https://sites-herbertsmithfreehills.vuturevx.com/103/12430/landing-pages/2016.09.30-
apac-fintech-briefing.pdf

Who can apply (Australia)?
The businesses:
• can test products and services without the holding the usual
Australian financial services licence (“AFSL”) or Australian credit
licence (“ACL”).
• have no more than 100 retail clients;
• have a total client exposure not exceeding
• AUD5 million;
• comply with consumer protection requirements;
• have adequate compensation arrangements; and
• have both internal and external dispute resolution procedures in
place.
https://www.bakermckenzie.com/-
/media/files/insight/publications/2018/01/qrg_ap_regulatoryfintech_jan18.pdf?la=en
Who can apply (Hong Kong)?
1. Banks authorized by the Hong Kong Monetary Authority
(“HKMA”) can apply to be in the sandbox operated by the
HKMA.
2. Firms licensed by the Hong Kong Securities and Futures
Commission (“SFC”) and start-up firms that intend to be
licensed by the SFC can apply to be in the sandbox
operated by the SFC.
3. Insurers authorized by the Hong Kong Insurance Authority
(“IA”) can make applications to the IA under the IA’s
insurtech sandbox. In addition, a licensing fast track for on-
line-only insurance companies will be introduced.
Who can apply (Malaysia)?
Financial institutions (“FIs”) and fintech companies

that are looking to provide financial services
(whether on their own or in collaboration with FIs)
that are or are likely to be regulated by Bank
Negara Malaysia (“BNM”).

Who can apply (Singapore)?
Both regulated financial institutions (“FIs”) and

unregulated firms that are looking to provide
financial services that are or are likely to be
regulated by the Monetary Authority of Singapore
(“MAS”).

Who can apply (Thailand)?
Applicants can be financial institutions; companies within the
financial business group of financial institutions; non-banks
under the supervision of the BOT; fintech firms; or technology
firms.
However, these firms must be juristic persons incorporated in

Thailand; have directors, executives, and employees with
managerial powers with specified qualifications and good
corporate governance; and have obtained relevant licenses if
required under applicable laws.
Who can apply (UK)?
The UK sandbox is open to authorised firms, unauthorised firms that
require authorisation and technology businesses that are looking to
deliver innovation in the UK financial services market based on the
following criterica:
1. Are you looking to deliver innovation that is either regulated
business or supports regulated business in the UK financial services
market?
2. Is your innovation new or a significantly different offering in the
marketplace?
3. Does the innovation offer a good prospect of identifiable benefit to
consumers (either directly or via heightened competition)?
4. Do you have a genuine need to test the innovation in our sandbox?
5. Are you ready to test the innovation in the real market with real
consumers?
https://www.fca.org.uk/firms/regulatory-sandbox/prepare-application
(Class Discussion)
apac-fintech-briefing.pdf Copyright 2021 © Prof. Hilton Chan 64
(Class Discussion)
AI = authorized institutions
(Class Discussion)
(Class Discussion)
(Class Discussion)
FinTech City vs. Financial Centre

World’s Financial Centres
- Heavy concentration of financial institutions
- Highly developed commercial and communications
infrastructure
- Ability to generate large number of domestic and
international trading transactions
- Sound and flexible financial policies
(http://www.therichest.com/business/economy/the-worlds-top-financial-centres/?view=all)
(http://www.businessdictionary.com/definition/financial-center.html)

FinTech city vs. Financial centre
FinTech city features
1. Facilitate innovative business models, e.g. sandbox

for all
2. “Technology Push” disruption
3. Customer-centric; Customer-direct services
4. Data transfer - Borderless and Instantaneous
5. Transaction - Any place, Any time, Any device,
6. Digital products/services
7. Availability of funding for startups
Any more?
Which city is the next big FinTech hub?
• Silicon Valley is still the largest recipient of fintech investment.
• However, New York had a third as many fintech investment
deals as Silicon Valley in 2011, two-thirds as many in 2013 and a
near-equal number in the first quarter of 2014.
• Between 2008 and 2013, New York reaped $1.1 billion in
fintech investment.
• London is now the biggest global centre for financial technology
firms, beating both Silicon Valley and New York based on the
number of people the industry employs.
• There are 44,000 people working in fintech in London,
compared to 43,000 in New York and just 11,000 in Silicon
Valley.
(source: https://www.americanbanker.com/news/which-city-is-the-next-big-fintech-hub-new-york-
stakes-its-claim)
Brexit / EU-China Investment Agreement

Leading FinTech centre in Asia ?
1. Hong Kong
2. Singapore
3. Shanghai
4. Shenzhen
5. Seoul
6. Bangalore
7. Tokyo
Who will be the next Asia FinTech centre?
Leading FinTech centre in Asia ?
1. Hong Kong – eye on China (Greater Bay area)
2. Singapore – eye on Asean (10 countries: Brunei

Darussalam, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, Philippines, Singapore,
Thailand, and Vietnam. 1 Observer – Papua
New Guinea)
3. Others….?
Business Strategy and Disruptive
Innovation

FinTech Disruptors
Attacking which parts of the
• Porter’s forces model
• Value chain

Government
Policies
FinTech
Disruptors

FinTech Disruptors
Attacking which parts of the
• Porter’s forces model
• Value chain
(one possible answer is …… Business Strategy & Technology –

Disruptor)
https://www.youtube.com/watch?v=EHTmxmuhZ10&t=51s

From the video
Strategy & Technology
1. Economy of scale
2. Transaction cost
3. Data economy (Financial data? Financial services?)
What is the change and impact to business with

disruptive technology?
Give examples
(Hints: computing power, memory, digital (A/V) technology,
communication technology, commercialization of IPR, ……..)

In addition
With disruptive technology → business world
1. Enhance the power of prediction

• Risk assessment; Data analytics
2. Create new customer experience
• One click to all
Examples?

What is Disruptive Innovation?
From Christensen’s paper,
a) What was the misinterpretation of his theory
“disruptive innovation”?
b) What were the two areas for disruptive
innovations originated?
c) Is Uber and Tesla a disruptive innovation? Why?
Why not?
d) What’s his view about education?
e) What are the differences between “sustaining
innovation” and “disruptive innovation”?
Misinterpretation of “disruptive innovation”
• Most people use “disruptive innovation” to describe any

situation in which an industry is shaken up and previously
successful incumbents stumble. This is too broad.
• “Disruption” describes a process whereby a smaller
company with fewer resources is able to successfully
challenge established incumbent businesses.
• Specifically, as incumbents focus on improving their
products and services for their most demanding (and
usually most profitable) customers, they exceed the needs
of some segments and ignore the needs of others.
(Source: https://hbr.org/2015/12/what-is-disruptive-innovation)
Misinterpretation of “disruptive innovation”
• Entrants that prove disruptive begin by successfully

targeting those overlooked segments, gaining a foothold by
delivering more-suitable functionality—frequently at a
lower price.
• Incumbents, chasing higher profitability in more-demanding
segments, tend not to respond vigorously.
• Entrants then move upmarket, delivering the performance
that incumbents’ mainstream customers require, while
preserving the advantages that drove their early success.
When mainstream customers start adopting the entrants’
offerings in volume, disruption has occurred.
Disruptive Innovations originated from
Low-end footholds
- Incumbents’ offerings often overshoot the
performance requirements of the latter
- This opens the door to a disrupter focused (at first)
on providing those low-end customers with a
“good enough” product
New-market footholds
- Create a market where none existed
- Find a way to turn non-consumers into consumers
e.g. personal copies vs. Xerox, mini-computers vs. mainframes
Disruptive Innovations
1. Disruptive is a process and often begins its life as a

small-scale experiment. E.g. discount store vs.
department store, Netflix vs. Blockbuster
2. Business model very different from incumbents –
“solution shop” to “process” business model.
e.g. Apps store and development in Apple’s iPhone building a
facilitated network connecting application developers with
phone users. Create new business opportunities.
3. Success is not built into the definition of disruption.
Disruptive Innovations (con’t)
4. Managing “Disrupt or be disrupted” simultaneously.
Incumbent companies should not overreact by dismantling a
still-profitable business.
They can create a new division focused solely on the growth
opportunities that arise from the disruption.
Incumbents will find themselves managing two very different
operations.
As the disruptive stand-alone business grows, it may
eventually steal customers from the core.
But corporate leaders should not try to solve this problem
before it is a problem.
Can this work?
Is Uber and Tesla a disruptive innovation?
Uber / Tesla
a) Low-end footholds?
No
b) New-market footholds?
No
Not on the business model, but how about the

technology innovation?
“Sustaining innovation” vs “Disruptive innovation”
Making a strategic choice between taking a sustaining path

and taking a disruptive one:-
e.g.
Uber vs. Taxi with app platform (GoGo Van)
Tesla vs. hybrid vehicles, driverless vehicles
Online education vs. Tertiary education institutions
Group Exercise
Name 2 examples of disruptive innovation /
technology according to
a) Christensen’s definition
b) Your view (may different from Christensen)
(https://hbr.org/2015/12/what-is-disruptive-innovation)

Disruptive Innovation / Technology
Case examples
Netflix vs Blockbuster; Wikipedia vs Encyclopedia;

Telephone vs Telegraph, Email vs mail; Smart phone vs
PC / PDA / camera; 3 D printer vs hand-made
prototype; ……..
e.g. Digital camera (Kodak), Mobile phone (Bell Lab), ……

Disruptive Innovation/Technology
Business Strategy?
IT Strategy? Info/Intel Strategy?
By intuition / business acumen?

Disruptive Innovation / Technology ≠ Success
Sustaining Innovation
Many other factors, e.g. product lifespan (S curve), …….

Disruptive Innovation (Business Strategy)
Summary
“Disruption” describes a process whereby a smaller company with
fewer resources is able to successfully challenge established
incumbent businesses.
Specifically, as incumbents focus on improving their products and
services for their most demanding / profitable customers, they
exceed the needs of some segments and ignore the needs of others.
(e.g. Japanese cars in 80’s-90’s)
Entrants that prove disruptive begin by
a) successfully targeting those overlooked segments,
b) gaining a foothold by delivering more-suitable functionality, and
c) offering at a lower price.
(https://hbr.org/2015/12/what-is-disruptive-innovation)

Disruptive Innovation (Business Strategy)
Summary (con’t)
Incumbents, chasing higher profitability in more-demanding

segments, tend not to respond vigorously.
Entrants then move upmarket, delivering the performance that

incumbents’ mainstream customers require, while preserving the
advantages that drove their early success.
When mainstream customers start adopting the entrants’

offerings in volume, disruption has occurred.
(source: https://hbr.org/2015/12/what-is-disruptive-innovation)

FinTech Disruptors
As such, we can conclude that:
FinTech disruptor can be driven by innovative business

model (disruptive or sustaining innovation) and/or
innovative ICT subject to government regulations (RegTech).
Innovative business model is driven by a “new move /

process” in the value chain and/or 7-Force model (Porter).
Innovative technology is driven by breakthroughs in

computing hardware, software and/or communication
network.

Insurance Technology
(InsurTech)

What is InsurTech?
InsurTech refers to the use of technology innovations
designed to squeeze out savings and efficiency from the
current insurance industry model.
InsurTech is a portmanteau of “insurance” and “technology”
that was inspired by the term Fintech.
Although many of these innovations are long overdue, there
are reasons why the incumbent players are so reluctant to
adapt. Insurance is a highly regulated industry with many
layers of jurisdictional legal baggage to deal with.
(source: http://www.investopedia.com/terms/i/insurtech.asp)

Legal Infrastructure
RegTech

What is RegTech?
RegTech is the use of new technologies to solve

regulatory and compliance requirements more
effectively and efficiently.
(source: stitute of International Finance, “Regtech: exploring solutions for regulatory challenges,” Washington DC,
October 2015)

Regulation Technology (RegTech)
Prevention, Investigation, Audit and Compliance
1. UN model laws on e-Commerce
2. UN model laws on e-Signature
3. Cyber Crime model laws (Council of Europe)
4. International Regulatory Framework for banks (Basel III)
5. Banking Ordinance, Securities Trading Regulations, ….
6. Data Privacy Protection
7. Intellectual Property Right (Trademark, Patent)
8. Evidence Ordinance (e.g. Digital Forensics and Evidence)
9. AML (Anti-money laundering), KYC (Know your client), and
CTF (Counter-terrorism financing)
10. Corporate policies, guidelines and standard operating
procedures
Future Directions for FinTech
Disruptors:
Opportunities? Risks?

Covid-19

New Normal

K-shape Recovery

Brexit / EU-China Investment Agreement

Ant Financial IPO

China - DCEP

Q&A

Prepare for Next Class
1. Pre-readings for next class.
2. Form small groups
3. Group Exercises/Presentation
4. Final Project/Individual Paper

Food for Thought

Economic Impact of FinTech (UK)
1. In 2015, it was assessed that FinTech industry
generated £20bn in annual revenue in the UK
2. Financial services paid £65bn in tax in 2012/13 and
account for roughly 9.4% of gross domestic product
(GDP). The UK has the largest financial services
sector in the world.
3. Similarly the UK’s prominent technology sector
contributes enormously to GDP, the internet industry
alone accounting for roughly 8.4%.
4. Technology and financial services are interrelated,
banking and securities institutions spending $485bn
(£319bn) on IT in 2014.
(https://www.anthemis.com/wp-content/uploads/2016/02/Anthemis-UK-Government-White-
Paper.pdf)

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FINA 5260

The Future of Financial Industry

Prof. Hilton Chan, PhD

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An economic industry composed of companies that use

FinTech is shorthand for ‘innovation in financial services’.

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Innovative New FinTech

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Regulators Copyright 2021 © Prof. Hilton Chan 10

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The banking sector was NOT threaten. Why?

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• Enhancing the traditional banking models? banking

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Wealthtech unites wealth and technology with the goal

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-Allow customers of Alipay to invest their

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1. Innovation – to find better ways of doing things

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• e-ID was secure and easy to use (two-factor authentication of e-ID)

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• Furthermore, the ‘once only’ principle adhered to means

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Financial institutions (“FIs”) and fintech companies

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Both regulated financial institutions (“FIs”) and

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However, these firms must be juristic persons incorporated in

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1. Facilitate innovative business models, e.g. sandbox

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2. Singapore – eye on Asean (10 countries: Brunei

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• Porter’s forces model

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