Hong Kong’s banks must step up their efforts to combat cybercrime and protect customers’ data amid a dramatic rise in online attacks, one of the city’s most senior banking executives has warned.
Mary Huen Wai-yi, chairwoman of the Hong Kong Association of Banks (HKAB), said that as lenders have rolled out more digital banking services allowing customers to conduct transactions on their computers or smartphones, so the risks have multiplied.
Her concerns are supported by figures from the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, which show cyberattacks on banks doubled last year. Online scams – including false banking websites, phishing emails and fake banking apps – reached 142 cases in 2018, a threefold increase from the 44 reported incidents in 2017 and a big leap from 35 a year before that.
“As banks have been launching more fintech measures in recent years, it has become more convenient for the customers but it has also introducing new types of risk. It is important for the banking sector to step up its risk management to protect the interests of customers,” Huen said in an exclusive interview with the South China Morning Post.
Phishing – sending out fake emails which look like official bank communications asking for customers’ information – was the fastest-growing cyber scam in Hong Kong last year. There were 62 reported cases, compared to just seven in 2017, according to the HKMA data.
A report last summer on cybersecurity risks for financial institutions by IntSights, an IT security firm, noted that “phishing kits”, which allow novice hackers to create elaborate phishing scams, could be purchased online.
“It is important for the banking sector to step up risk management to protect the interests of their customers,” she said.
“In Europe, there are already laws regarding how companies should protect the personal information of customers who shop online or use other online services. Hong Kong will also need to study these issues.”
The HKMA’s deputy chief executive, Arthur Yuen Kwok-hang, said in a media briefing last month that the authority would begin checking the ability of the city’s banks to recover from a cyberattack.
In September 2017, it announced seven measures to encourage banks to develop their fintech capabilities. The authority, Hong Kong’s de facto central bank, is due to issue the first virtual bank licence in the first quarter of this year. Virtual banks operate online and have no physical branches.
Huen said they will bring new energy and new services to the banking sector, and allow technology companies to enter the industry. Standard Chartered Bank is among the 29 applicants to apply for a virtual banking licence.
“Virtual banks will focus on some new products and segments the traditional banks tend not to focus on or offer. This will increase financial inclusion to some customers who currently do not use many banking services,” said Huen.
Huen is a veteran banker with 28 years of experience. In Hong Kong, the head of the three note-issuing banks – HSBC, Standard Chartered Bank and Bank of China Hong Kong – take turns to be the chairman of the HKAB, and this year is the turn of Standard Chartered.
Among the challenges facing the banking industry, she said the trade war between the US and China would continue to slow economic growth in Hong Kong and mainland China, leading to a slowdown in loan growth. HKMA data for all Hong Kong banks showed loan growth of just 4.4 per cent in 2018, compared to 16.1 per cent in 2017.
Yet Huen remained upbeat about the prospects for Hong Kong’s lenders, thanks to the “Greater Bay Area” – the Chinese government’s plan to create an economic hub by linking Hong Kong to Chinese cities in the Pearl River Delta.
She said lenders could profit from the Greater Bay Area market of 70 million people and also work with technology companies based in Shenzhen to develop new fintech products.
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