Financial Innovation, broadly speaking, is the process of creating new financial products and services, often including the use of new financial technologies (FinTech), such as AI, Blockchain and Security, Big Data, Cloud Computing, and even Internet of Things (IoT) .
A core research area of APAEM, financial innovation is one of the crucial elements in diversifying Macao’s economy and in strengthening Macao’s ability to assume the role of One Platform in support of trade and investment between China and the Portuguese-speaking countries. In view of the expanded cooperation, there is considerable need for innovative financial mechanisms and platforms to facilitate inbound and outbound capital flows, such as investment and funding as well as other related initiatives.
Furthermore, the advent of financial and trade integration of the Greater Bay Area (GBA) calls for greater innovation in financial services and even policies, especially in supporting the creation of a second Macau in Hengqin. Macao will play an important role in the cross-border financial collaboration and in the construction of a green financial system. Also, Macao is planning a RMB-denominated Stock Exchange, in which it will be a very important milestone in showing such determination. To meet these challenges, Macao and the GBA must embrace innovative thinking and new technologies to be able to forge new paths in financial connectivity and wealth management.
In the context of financial innovation, APAEM has identified several goals that it would like to fulfill for the benefit of Macao’s economic development. The following are the directions that APAEM plans to follow:
Elevating the overall standards of the financial sector in Macao
Human talent has been proven to be the greatest asset of any organization or country. To advance the overall service standards of the financial sector in Macao, appropriate talent training and nurturing will not only provide the backbone structure to support the operations of the industry, it will also be a potential force to invigorate and reinvent the status quo to look ahead to global financial trends and innovations. It is, therefore, a priority to cultivate a critical mass of home-grown talents for the financial sector of Macao in anticipation of the fast-changing challenges lying ahead.
Farther down the road, Macao can also tap into the potential of being a possible choice for migration by investment fund firms from neighbouring financial centres who are considering location alternatives for development. Similar to Greenwich, Connecticut – a small town near New York City in the United States that has become a “hedge fund capital”, Macao has the attraction of a friendly atmosphere, an idyllic environment, and less costly overhead expenses. To this end, legal and regulatory aspects of such arrangements must also be reviewed to pave the way. An interdisciplinary approach will be necessary in order to explore the feasibility of this proposition.
Developing Macao into a wealth management centre
This direction is also dependent on the availability of local human talents. At present, the financial sector of Macao does not produce its own financial products, and only serves as a channel of distribution. In the long run, it may be a worthwhile endeavour for Macao to acquire the capability of developing new financial products and services catered to its appropriate needs. By having full control and knowledge over these new initiatives, the level of risks and other implications can be minimized. Again, there must be a stable supply of financial talents in Macao to be able to fuel this development.
As to the markets for the products and services developed locally, there are two potential outlets that are associated with the One Platform initiative:
- Portuguese-speaking countries that make use of Macao as a platform for trade and exchanges with China;
- Renmenbi (RMB) settlement centre to be established in Macao. RMB-related products and value-added services may be produced to suit the needs of the activities of the settlement centre.
Developing smart finance and investment
In recent years, there is a significant rise in global FinTech investments. Revolutionary new technologies in the financial sector has disrupted the traditional operating mode of banking and financial institutions. As smart finance is inevitably the trend of the future, the Financial Innovation team at APAEM will therefore aim to facilitate our researchers and students to participate in the research and development of technologies for smart finance and investment, such as big data, artificial intelligence, blockchain, internet, and security.