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92% of HK FSIs plan to partner with fintechs

92% of HK financial institutions plan to partner with a FinTechMore than nine in 10 (92%) financial institutions in Hong Kong and Singapore expect to collaborate with a fintech company over the next 12 months, as they struggle to innovate internally fast enough, new research suggests.

A survey by international law firm Simmons & Simmons also shows that 62% of respondents in the two markets have been building in-house digital and fintech expertise.

Two thirds (67%) of Hong Kong respondents meanwhile plan to increase their adoption of cloud-based services.

In addition, less than half (47%) consider consortia products with other institutions to be effective in improving Fintech innovation and only 50% of Hong Kong respondents – compared to 100% in Singapore – favor an approach of acquiring fintech companies or startups.

Regulatory compliance barriers are also inhibiting closer collaboration with fintech providers.

The survey found that 78% of respondents would need much stronger assurance of fintech companies' credibility before they pass the regulatory compliance function on to them.

Likewise, 50% consider the transfer of large volumes of data to fintech companies to be a potential threat and 70% report cybersecurity to be the top risk associated with partnering with fintech firms.

"Our Hyperfinance research demonstrates that cybersecurity concerns remain a major barrier to effective collaboration by fintech firms and financial institutions," Simmons & Simmons consultant Melissa Chim said.

"This significant challenge can be dealt with, by acknowledging that investors and regulators will expect business, legal and compliance rather than IT to be articulate on the cyber due diligence on a fintech collaboration and the institution's cybersecurity programme, and to adopt a dynamic approach to cyber-testing, as cybercrime is constantly evolving to avoid static safeguards."

The findings of the survey align with recent research from PwC indicating that 82% of Hong Kong financial institutions plan to form partnerships with FinTech companies, but only 51% ave adopted what can be considered a 'disruptive' strategy.