GBA Digest series of perspectives Issue 5

The market environment remains subdued in the third quarter of 2022, with global inflation and the resultant interest rate hikes posing significant challenges to businesses. With further interest rate increases expected in the coming months, this uncertainty is likely to prevail.

The continued impact of COVID-19 is another factor hampering business growth for many. However, the Hong Kong’s insurance industry still looks promising, by demonstrating resilience and embarking recovery despite the challenges of the pandemic.

In this issue, we are delighted to have AIA Hong Kong & Macau CEO Alger Fung shared his views on the prospects of the insurance industry in Hong Kong and the GBA in our Executive Dialogue section. In conversation with Simon Dai, Insurance Partner of Deloitte China, Alger voices his optimism about the business potential in these areas going forward. He opines that the likely impending rapid economic and social development of the GBA will present ample opportunities for the insurance market, with the GDP and population growth providing perfect stimuli to address the region’s insurance protection gap.

Insurers will be expected to develop alongside South China’s transformation into an innovation hub, and, as Alger points out, this will include being able to demonstrate an enhanced service scope and digital capability. In view of Alger’s insights, we are confident that Hong Kong insurance sector will benefit from the growth in the GBA region and enhance its position as a leading insurance hub in Asia.

Digital transformation of the financial industry remains a major area of concern for businesses, and at Deloitte, we are always keen to emphasize its importance to financial institutions. This issue features actionable insights from our experts for financial institutions wishing to outpace their peers in the race for digital transformation and ensure they have the capability to keep up with market innovation and meet evolving customer expectations.

In August, Deloitte supported the Chinese Banking Association of Hong Kong (HKCBA) in the organization of a seminar named Digital Transformation in Banking: Practice Sharing. At Deloitte’s Hong Kong office a number of guest speakers shared their thoughts on and experience in enacting digital transformation in the financial industry, covering key topics such as data and cloud infrastructure and customer engagement in the Metaverse.

Deloitte Consulting Partner Sunny Ip spoke at the event, during which he explained that the process of digital transformation should go beyond simply utilizing online channels – change and innovation must be embraced across all facets of the business in order to achieve true digitalization. With many banks still using legacy platforms and systems that are costly and complicated to replace, the issue of modernization has become more pressing, and will need to encompass an overhaul of their operating models and infrastructure in order to be able to deliver real innovation to the market.

These thoughts were echoed by Shiwei Wu, Huawei Cloud APAC Chief Technology Officer, who emphasized the importance of having the right digital infrastructure to enable true digital transformation, with many financial institutions now choosing to move towards hybrid multi-cloud models. Further details on the HKCBA event and insights from digital transformation in practice can be found in this issue.

As the development of the GBA continues, new opportunities are emerging throughout the region’s financial sector. The recently announced Swap Connect scheme is just one of a string of initiatives aimed at enhancing the connectivity between international and Mainland Chinese financial markets. Set to launch in early 2023, the mutual access scheme will initially facilitate interest rate swaps, with further products added in due course. In this issue, Deloitte FSI Audit and Assurance Partner Ivan Tang provided his analysis of the initiative and the potential benefits it is likely to offer.

The GBA offers a rapidly expanding array of opportunities for the financial sector. As a number of financial leaders have alluded to, a robust GBA strategy addressing market development, emerging customer needs, and innovation and technology is imperative for capturing growth opportunities in the rapidly developing GBA market.