Hong Kong firms need to take tech­nol­o­gists on board

China Daily (Hong Kong) - - COMMENT -

The global fi­nan­cial ser­vices in­dus­try is un­der­go­ing sig­nif­i­cant tech­no­log­i­cal change. Asia is no ex­cep­tion, with tech­nol­ogy chang­ing the way busi­nesses op­er­ates in the re­gion across func­tions as di­verse as com­pli­ance, sales and pay­ments.

To keep pace with forces of tech­no­log­i­cal dis­rup­tion, gov­ern­ments across Asia, in­clud­ing in Hong Kong, are look­ing to pro­mote a cul­ture of in­no­va­tion by fos­ter­ing the evo­lu­tion of fi­nan­cial tech­nol­ogy. For ex­am­ple, the Hong Kong Mon­e­tary Author­ity estab­lished a Fin­tech Fa­cil­i­ta­tion Of­fice in March last year to help de­velop and pro­mote the fin­tech ecosys­tem.

Singapore, which com­petes in many ways with Hong Kong to be Asia’s tech­nol­ogy hub, has ar­guably been even more ac­tive. The Mon­e­tary Author­ity of Singapore, the coun­try’s fi­nan­cial ser­vices reg­u­la­tor, has had a ded­i­cated fin­tech team fo­cused on es­tab­lish­ing part­ner­ships to drive fin­tech growth since 2015. Singapore has also com­mit­ted to spend­ing S$225 mil­lion ($163 mil­lion) over the com­ing five years to en­cour­age banks to es­tab­lish in­no­va­tion hubs and be­spoke tech­nol­ogy projects.

Govern­ment sup­port has an im­por­tant role to play but it is crit­i­cal that fi­nan­cial ser­vice providers them­selves are re­cep­tive to tech­no­log­i­cal in­no­va­tion and un­der­stand the im­pli­ca­tions that tech­nol­ogy could have for their busi­nesses and strate­gies. Those firms that adopt this mantra are most likely to re­main rel­e­vant.

One in­di­ca­tor of busi­nesses’ abil­ity to em­brace tech­no­log­i­cal dis­rup­tion and harness its po­ten­tial is the pres­ence of tech­nol­o­gists at se­nior lev­els of man­age­ment. Board and lead­er­ship teams have his­tor­i­cally been made up of pro­fes­sion­als with back­grounds such as ac­count­ing, con­sult­ing and law. Given the im­por­tance of tech­nol­ogy to­day, firms need to re­al­ize that pro­fes­sional tech­nol­o­gists are vi­tal strate­gic re­sources and have a po­ten­tial key role to play at the ex­ec­u­tive level.

Cala­s­tone re­cently con­ducted re­search into the rep­re­sen­ta­tion of ca­reer tech­nol­o­gists at the se­nior ex­ec­u­tive level in Hong Kong and Singapore, by as­sess­ing the makeup of boards and lead­er­ship teams of HSI 100 and SGX 100-listed com­pa­nies last year com­pared with 2011.

The re­search showed Hong Kong sig­nif­i­cantly lags Singapore in rep­re­sen­ta­tion of tech­nol­o­gists in se­nior man­age­ment. While 44.6 per­cent of listed com­pa­nies ex­am­ined in Singapore had a tech­nol­o­gist in a lead­er­ship po­si­tion (that is lead­er­ship and se­nior man­age­ment) last year Hong Kong lagged sig­nif­i­cantly at just 20.3 per­cent. This could be be­cause Singapore has a reg­u­la­tory regime that is more overtly sup­port­ive of tech­nol­ogy development.

For ex­am­ple, ear­lier last year Singapore launched the world’s first reg­u­la­tory sand­box ini­tia­tive — the MAS Fin­Tech Reg­u­la­tory Sand­box — which lets fi­nan­cial ser­vice providers and fin­tech play­ers ex­per­i­ment with in­no­va­tive fi­nan­cial prod­ucts or ser­vices within a well-de­fined space and for a spec­i­fied du­ra­tion.

Sim­i­larly, a study pub­lished by Ernst & Young in Fe­bru­ary last year in­di­cated Hong Kong trails Singapore in the area of pol­icy sup­port for fin­tech in­no­va­tion. The re­port sug­gests Hong Kong lacks a clear reg­u­la­tory frame­work, mean­ing fin­tech firms can The author is man­ag­ing di­rec­tor and head of Asia for fi­nan­cial tech­nol­ogy firm Cala­s­tone.

find it more dif­fi­cult to es­tab­lish them­selves. This could be be­cause reg­u­la­tors in Hong Kong are not as aware of the op­por­tu­ni­ties rep­re­sented by fi­nan­cial tech­nol­ogy as their coun­ter­parts in Singapore.

That said, both mar­kets have seen steady in­creases in the num­ber of com­pa­nies with tech­nol­o­gists in se­nior po­si­tions over the past five years. Singapore saw an in­crease from 17.9 per­cent in 2011 and Hong Kong from 6.3 per­cent. This growth sug­gests firms are bet­ter po­si­tioned to im­ple­ment the strate­gic ad­just­ments nec­es­sary to em­brace new tech­nol­ogy.

It is en­cour­ag­ing to see a fun­da­men­tal shift in the over­all per­cep­tion of the tech­nol­ogy func­tion within fi­nan­cial ser­vices firms. Whereas tech­nol­ogy was pre­vi­ously con­sid­ered a siloed func­tion, it is in­creas­ingly be­ing rec­og­nized as an in­te­gral part of the business that can be cre­atively lever­aged to de­liver strate­gic change. How­ever, much still needs to be done in Asia in­clud­ing Hong Kong to catch up to in­ter­na­tional peers. A pre­vi­ous study con­cluded that FTSE 100 in­dex con­stituents in the United King­dom have made greater progress in terms of board­room rep­re­sen­ta­tion. For ex­am­ple, no com­pa­nies an­a­lysed in Hong Kong and Singapore have a tech­nol­o­gist in the board­room while 4 per­cent of UK com­pa­nies listed on the FTSE 100 now have a tech­nol­o­gist at the board level.

It is clear that there is sig­nif­i­cant scope to im­prove the pop­u­la­tion of tech­nol­o­gists in cor­po­rate lead­er­ship po­si­tions in Asia and glob­ally. In fact, there are op­por­tu­ni­ties for fi­nan­cial ser­vices firms to learn lessons from sec­tors which have pre­vi­ously un­der­gone dis­rup­tive tech­nol­ogy changes.

The re­search shows that, un­sur­pris­ingly, the tech­nol­ogy sec­tor leads in Hong Kong, ac­count­ing for more than 46 per­cent of tech­nol­o­gists in a lead­er­ship po­si­tion (se­nior man­age­ment and lead­er­ship), fol­lowed by fi­nan­cials. In Singapore, on the other hand, the bank­ing sec­tor leads the way, with 12 per­cent of lead­er­ship po­si­tions oc­cu­pied by tech­nol­o­gists, fol­lowed by real es­tate man­age­ment and development.

In par­tic­u­lar, bank­ing has been driv­ing tech­no­log­i­cal changes. Re­tail banks have made enor­mous strides in digi­tis­ing cus­tomer-fac­ing func­tions, in the process dra­mat­i­cally en­hanc­ing the client ex­pe­ri­ence. They have been evolv­ing with new choices in chan­nels and ad­vances in pay­ments ser­vices.

To fur­ther ac­cel­er­ate dig­i­ti­za­tion, firms, re­gard­less of sec­tor, need to strate­gi­cally in­cor­po­rate tech­no­log­i­cal in­no­va­tion into their busi­nesses. Deal­ing with the tech­nol­ogy rev­o­lu­tion re­quires in­no­va­tive think­ing and cul­tural changes in how firms ap­proach tech­nol­ogy, and those which put tech­nol­ogy at the core of what they do will be win­ners and will likely re­tain or grow their mar­ket share.

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