The fact that the fintech regulatory landscape is also constantly evolving exacerbates this further, with 73% of incumbents and 88% of virtual banks citing this as a challenge to partnering. In addition, 78% of incumbents state cybersecurity risks as a hurdle, as they're concerned that fintechs' IT security is .
For fintechs to benefit from an increasingly distributed banking model, they'll need to both overcome the current hurdles and prepare for increased regulatory oversight. For example, fintechs could develop initiatives with banks within the Fintech Regulatory , which enables partners to launch pilot trials for limited customers without having to achieve full compliance.
This environment would alleviate banks' concerns regarding regulatory uncertainty. To mitigate cybersecurity concerns, Hong Kong fintechs should look to harness the local open banking by working with banks to develop security standards for the sharing of customer data. They could also propose to help banks upgrade their IT systems to ensure full interoperability.
These initiatives would promote further partnerships with incumbents and virtual banks, with fintechs increasingly involved in the distribution of financial services, enabling them to scale and reach wider customer bases. However, fintechs should also prepare for more stringent requirements, as their growing role in the banking system will mean increased oversight from financial supervisors.
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