Bulletin November 2018 (Vol. 20 No. 1)

Our main focus is to bring HKU research to the FinTech industry. Dr S M Yiu MOOCs and more The University is embracing the academic opportunities offered by its leading research in FinTech. FinTech has been named a strategic interdisciplinary research area and is the focus of new research centres being established in the Faculties of Law, Business and Economics and Engineering. Research- related MoUs [Memorandums of understanding] have also been signed with the Hong Kong Science and Technology Park and Cyberport. And a new Law, Innovation, Technology and Entrepreneurship (LITE) programme is being set up to facilitate the transfer of research into impact. Asia’s first FinTech MOOC (massive open online course), led by Professor Arner, Mr Barberis and other scholars and industry SuperCharger start-up SuperCharger is a start-up formed in 2015 by PhD candidate Janos Barberis, with Professor Douglas Arner on the advisory board. The company rapidly developed into Asia’s top FinTech accelerator, working with regional growth-stage companies as well as international mature scale-ups wishing to enter Asia. To date, it has received over 1,000 applications and helped 46 companies through its 12-week programme that facilitates market entry via workshops, access to investors and mentors, and publicity, which now runs in Malaysia as well as Hong Kong. The company also feeds indirectly into research, Professor Arner said. “Interacting with start-ups and the industry through SuperCharger is very important for us to understand what people are doing, what sorts of business ideas and technologies they are looking at and what issues they are running into,” he said. experts, was launched on edX in the spring ( www.edx.org/course/introduction-to-fintech ) . It has attracted over 30,000 enrolments from every country in the world and with Standard Chartered Bank made it an element of its FinTech training programmes. The course will soon be joined by two other HKU FinTech MOOCs from the Business and Engineering Faculties to jointly form HKU’s first online professional certificate. FinTech is also featuring in study programmes. The first students in a new Bachelor of Arts and Sciences in FinTech will start in September, 2019 and postgraduate FinTech programmes have or will soon be launched in the Faculties of Law, Business and Engineering. regulators are looking at what lessons can be drawn not just to support financial inclusion, but as a strategy for transforming their digital financial systems,” Professor Arner said. “Importantly, 70 per cent of that 1.7 billion have mobile or smart phones and this sets the stage for rapid transformation in the coming years.” With AFI, Professors Arner, Buckley and Zetzsche are now working with a group of ASEAN [Association of Southeast Asian Nations] countries on how to implement this strategy, as well as with another group of Pacific Islands countries working on a regional approach. Blockchain, Bitcoin and trust One system that has Professor Arner’s attention is blockchain technology. Most people associate it with Bitcoin, but it has much wider scope than that. “We’ve spent a lot of time looking at the legal and regulatory issues around blockchain,” he said. “Blockchain is basically a record-keeping system and its core strengths are in security, transparency and permanence. If you want speed, it’s not very effective. So for securities trading, which takes place throughout the day at very high speed, blockchain doesn’t work well for that. But at the end of each trading day when you have to record who owns what, it’s very useful.” Cryptocurrencies such as Bitcoin are basically a unit of account for pricing or valuing the things recorded on a blockchain’s ledgers. “Lots of people are interested in cryptocurrencies. Bitcoin was the first real application. Over the past year we’ve seen a massive spike in value followed by a massive collapse that has now entered the history books as one of the world’s greatest speculative bubbles. It doesn’t mean the price won’t go up again or that the underlying asset is valueless. But from my standpoint, the underlying technology of blockchain is more of interest than the cryptocurrency application,” he said. The team is currently working with the Asian Development Bank on policy issues around blockchain. One thing Professor Arner is unwavering about is that the need for regulation of FinTech and all its permutations – not just for the consumer, but the industry. “Most FinTech start-ups want regulation because it gives a level of trust to the community, which is good for their business. It helps them compete with the traditional financial institutions. To the extent that they have a license and are regulated, it definitely increases trust,” he said. Dr S M Yiu is the Director of HKU’s new FinTech Lab, which has been launched with a US$400,000 private donation and will bring together computer science and other scholars to translate the University’s findings into industrial applications. Dr Yiu has been working extensively in computer security and cryptography and will lead the lab in exploring some of the most promising areas have developed an AI engine that uses historical data to predict the best dozen or so stocks to buy and sell within a given period. Unlike human financial advisors who might review portfolios with clients every few months, this AI agent can give a timely report and signal if the portfolio mix should be changed. Dr Yiu and his student have formed a new start-up, Brain Investing Limited, which has received RMB 4 million from a private investor. A third area that has Dr Yiu’s attention is security, in particular fraud. He has started a project to analyse how people use Bitcoin to determine if they are using it for money laundering. Preliminary results show there are unusual transactions, which will be probed further. In future, the FinTech Lab may also look at big data analysis and natural language processing. “Our main focus is to bring HKU research to the FinTech industry,” he added – something that will also include launching a new massive open online course on blockchain technology in 2019. in the artificial intelligence (AI) and data analysis that underpin financial technology. One of these is blockchain, which decentralises data distribution without the need of a trusted authority. Dr Yiu has been working on a platform that enables data to be traded directly between parties rather than the costlier route of going through such an authority. The data has to be encrypted to protect privacy and copyright, which can make it difficult to extract the data easily, but he has been developing a workaround. “We are building a better platform that encrypts the data but has a library on top of it that lets people do calculations or extract certain statistics from the encrypted data. It lets you get results without needing all the underlying data.” The idea is somewhat akin to publishing the findings of research but not the raw data, and letting others use the findings for their own purposes. As Dr Yiu pointed out, businesses often do not need every scrap of data about people to calculate such things as their preferred style of smartphone. New start-up Another area he and his team are looking at is ‘algo-trading’ – using algorithms to guide financial trades. He and a former PhD student A new R&D laboratory in the Faculty of Engineering is bringing together expertise on blockchain, algorithms, security and more to explore new frontiers in financial technology. THE ‘TECH’ BEHIND FINTECH 07 | 08 The University of Hong Kong Bulletin | November 2018 Cover Story