The HKMA will launch the Fintech Supervisory Sandbox to allow banks to test new products and applications, chief executive Norman Chan said.
"Banks can try out their new fintech products without the need to achieve full compliance with the HKMA’s usual supervisory requirements. This will enable banks to gather real-life data and user feedback on their fintech products or services more easily and in a controlled environment, so that they can make suitable refinements to their products before the full launch," Chan said.
There is a commonly held perception that the Hong Kong financial services sector has been slow to develop financial technology products "but I do not subscribe to this view, at least insofar as the banking sector is concerned", Chan said.
The industry has been working on new payment facilities using smartphones and near field communication technology, on biometrics authentication, blockchain, robotics and augmented reality, he said.
More details of the sandbox will be released soon, Chan said.
Singapore announced a similar sandbox in June. According to the proposals from the Monetary Authority of Singapore companies will have to apply to participate in regulatory sandbox testing. Applications will be considered against specific criteria, such as the innovativeness of the fintech product or service that has been developed, whether the company behind the solution intends to launch it widely in Singapore, and whether the innovation would deliver benefits to consumers and/or businesses.
Technology law expert Paul Haswell of Pinsent Masons, the law firm behind Out-Law.com said: "Hong Kong has an admirable number of fintech startups, but the majority of them find difficulty in gaining support and buy-in from the financial sector in Hong Kong."
One of the reasons why the financial sector has been slow to embrace fintech is concern over regulatory requirements, but that is only part of the greater picture. Hong Kong needs greater support and investment in its fintech scene to really compete with other financial centres, including Singapore," he said.
"Furthermore, the rivalry between Hong Kong and Singapore suggests something of a 'keeping up with the Joneses' about this development. Still, whatever the reasons behind the move, Hong Kong’s burgeoning fintech developers deserve all the help they can get," Haswell said.
The UK's Financial Conduct Authority (FCA) has already opened its own regulatory sandbox to applications from firms keen to test innovative products, services, business models and mechanisms of delivery under a light-touch regulatory framework.