Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

How fintech ideas can solve big credit woes of small companies

Government-backed research institute designs credit-scoring framework to help city’s businesses access funds

New technology is helping address some of the problems small companies face in obtaining loans thanks to the Hong Kong Applied Science and Technology Research Institute (ASTRI).

Micro, small and medium-sized enterprises (MSMEs) play an important role in Hong Kong’s economy, making up 98 per cent of business units and accounting for 45 per cent of employment in the private sector.

Yet when it comes to borrowing money, MSMEs often struggle to provide the information and documentation banks need to assess their creditworthiness.

“More often than not, SMEs don’t have the cleanest of books,” says Hugh Chow, CEO of ASTRI, which was set up by the Hong Kong government in 2000 to enhance the competitiveness of the city’s technology-based industries.

“They have a lot of offline and cash-based transactions and that puts them at a disadvantage.” Florian Spiegl, co-founder and chief operating officer at FinFabrik–a fintech start-up that creates software and services for institutions to connect asset issuers and investors – says start-ups struggle to get loans as they do not typically fit lenders’ frameworks.

“We quickly learned the conversation stops once banks realise they are talking to a start-up,” he says.

Spiegl believes it would be helpful if banks could use alter-native sources of data in their lending assessments for MSMEs, which cannot prove creditworthiness in other ways.

“This would offer a different angle on risk and creditworthiness that more accurately reflects the company’s economic situation,” he says.

Eddie Yue, Chief Executive of the Hong Kong Monetary Authority (HKMA), says that it is a global phenomenon that smaller businesses often find it challenging to access finance.

“SMEs play an important role in the economy,” he says. “Fintech is believed to be an essential tool to help expand SMEs’ access to credit by lowering costs and better managing the credit risks.

“Hong Kong is well positioned to drive fintech development given the support from the industry and society as a whole.”

To encourage banks to adopt fintech innovation when performing credit assessment, the HKMA has been using various approaches including issuance of circulars to provide guidance to the banking industry on the use of artificial intelligence on credit underwriting.

ASTRI is also identifying alternative sources of information to assess the creditworthiness of SMEs, such as cash flow, point-of-sale transaction records, utility bill payments and even information from online accounting software programs. It is also exploring the possibility of enabling banks to access this information through an Open Application Programming Interface (API), making it easier to exchange information and execute instructions between different computer systems.

“Banks have very sophisticated tools and formulas to calculate creditworthiness,” Chow says.

“We can help banks get access to information quicker. For an SME that is in distress, a day saved is very important.”

He says one challenge of creating such a system is ensuring it is secure and that no information about a person or company is shared without consent.

To encourage the development and wider adoption of Open API by the industry, the HKMA introduced Open API Framework for the Banking Sector in July 2018.

It is currently being used by 20 retail banks with over 800 Open APIs providing details of their products and supporting product applications. In time, it will enable customers’ account information to be shared with their consent, enabling transactions to be carried out and driving product innovation in the banking sector, which can potentially facilitate loan applications.

Another potentially game-changing development is the entrance of virtual banks, with banking licenses granted to eight virtual banks by the HKMA last year.

As of mid-June, two virtual banks have officially begun operations and four others are conducting pilot trials of their services in the HKMA’s Fintech Supervisory Sandbox. The remaining two virtual banks are completing the necessary preparatory work with a view to offering services to the public as soon as practicable.

We can help banks get access to information quicker. For an SME in distress, a day saved is very important

“The HKMA encourages the development of virtual banks and expects new forms of banking services can offer a new kind of customer experience.” Yue says.

“Looking ahead, digitalisation is a means of enhancing financial inclusion for the underserved SMEs in Hong Kong. By nature, virtual banks tend to place an emphasis on adopting technology to provide banking services including loans, and we expect they will facilitate financial innovation as well as SMEs’ access to finance.”

Rockson Hsu, CEO of Hong Kong’s first virtual bank, ZA Bank, believes alternative data could be useful in helping banks make lending decisions.

He says that for certain types of SMEs, electricity bill records not only enable lenders to see that firms have a good payment history, but fluctuations can help banks assess whether business is booming.

Such an assessment could be made easier by big data and AI. The HKMA recently issued specific guidance about these areas to allow banks to address the new risk management challenges involved.

“Data keeps changing,” Hsu says. “Traditional banks will look at data annually, but by the time you get figures for sales and the fiscal year [ending] in December, it is March.”

The alternative MSME credit framework is only one of many areas in which ASTRI is currently working to improve the banking system.

As the city’s premier technology research institute, it is also looking at ways to boost security by improving customer authentication and has developed a system that enables consumers to be identified through their palm print and the veins in their hands.

“Something that really sets us apart here at ASTRI is that we do applied research,” Chow says.

“We don’t do research for the sake of doing research, we do it to solve a real industry problem or societal problem.”


How banks better prepare for countering cyberattacks

Banks are enhancing their cybersecurity by sharing information with the support of Hong Kong Applied Science and Technology Research Institute (ASTRI).

The Hong Kong Association of Banks asked the research and development centre for technology-based industries to build the Cyber Intelligence Sharing Platform, which enables the licensed banks to share intelligence about cybersecurity risks and their experiences of preventing hacking attempts.

It also connects the banks to real-time information about the latest cyber threats provided by intelligence bodies, which enables them to prepare better for potential attacks.

The platform – initiated by the HKMA and supported by the Hong Kong Association of Banks – is one of the three pillars of the HKMA’s Cybersecurity Fortification Initiative designed to enhance the resilience of the banking industry against cyber attacks.
A key challenge that ASTRI faced in creating the platform was to ensure that it was secure, so that banks would have the confidence to use it for sharing information with their peers.

Dr Andrew Wat, ASTRI’s director in cybersecurity and analytics, says: “We had to pay special attention to requirements like two-factor authentication, end-to-end encryption, anonymous posting, the security of data at rest, intelligence exchange protocols and regulatory requirements.”

Before the platform’s launch it also underwent an external security audit, he says.

More than 160 of Hong Kong's licensed banks have joined the platform since it was launched two years ago.
Lucas Hui, ASTRI’s chief technology officer, says the fact that ASTRI remains neutral and impartial helped encourage banks to use the platform.

“We provided timely technology information to the banks to help them fulfil their needs and regulatory requirements,” he says.
Besides the banking industry, ASTRI also shares its own research on cyberattacks and information from its CyberSecurity Special Interest Group with professionals in town, Hui says.

“Sharing information helps to protect the whole community,” he says.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
×