HKMA presents financial infrastructure project to facilitate loans to SMEs



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HKMA is working with banks to study the feasibility of the ‘Trade Data Exchange’, a new financial infrastructure to facilitate financial intermediation.

The HKMA (Hong Kong Monetary Authority) has revealed details of a new financial infrastructure project called ‘Trade Data Interchange’ (CDI), which it says will enable more efficient intermediation in the banking system and improve financial inclusion in Hong Kong.

The CDI is a consent-based financial infrastructure that would enable a more secure and efficient flow of data between banks and commercial data sources, according to HKMA chief Eddie Yue in a keynote address at Hong Kong Fintech Week. on Monday (November 2).

The CDI has the potential to solve long-standing problems in SME financing by allowing SMEs to use their own data to improve their access to financial services, he said.

Last week, Yue had said that the HKMA was working on a “new idea” that aimed to allow SMEs to share their data with banks more easily, in an attempt to facilitate their access to financing, while allowing banks to act more accurately objective credit assessments with access to more data.

In his keynote address, Yue said that the current bilateral nature of data sharing agreements between banks, fintechs and merchants means that there are no compatible protocols or standards, limiting the scalability of the solutions. It makes it difficult for banks to collect alternative-style data based on customer behavior that can be used to assess credit, which is why so many small businesses struggle to access affordable loans and business financing.

CDI will be a place through which consumers and businesses can share data with banks through fintechs, public services, and payment gateways. “With the consent of the client, banks will gain access to a substantial body of data,” Yue said, adding that it will allow them to forecast future commercial cash flows, identify cash flow patterns, understand counterparty risks and make loans without having to request guarantees. .

“This will allow bank clients, especially SMEs, to use their own data to improve their access to financial services.”

To study the technical feasibility of the CDI, HKMA is conducting a proof-of-concept (PoC) study in collaboration with banks. The study focuses on the use of trade-related data to facilitate the trade finance application process and is expected to be finalized by the end of 2020.

The next phase of the study will begin in 2021, covering other sources of business data that could facilitate alternative credit scoring by banks.

To develop related technology for alternative credit scoring, HKMA has separately commissioned the Hong Kong Applied Science and Technology Research Institute (ASTRI) to study the use of artificial intelligence in SME loan applications.

The findings have been revealed in a white paper, presented at Hong Kong Fintech Week.

Additional reports from DigFin.





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