monitoring, regulatory reporting, risk management and compliance. according to a recent report, investment in regtech companies reached us $ 1 billion globally in 2017. but why is regtech gaining popularity? i believe there are three key drivers : 1. first is the increase in the complexity and scope of more stringent regulations globally such as basel iii and enhanced standards for combating money laundering. a few recent studies have suggested that the volume of global regulatory changes went up by at least five - fold in the past decade. hence, there has been a growing desire of the banking industry, particularly in jurisdictions with more daunting regulatory requirements, to explore the use of new technologies to enhance the effectiveness and lower the cost of their compliance efforts. 2. the second driver is the sheer volume of transactions and data that many banks need to handle as the economy and business continue to grow. if we take the mobile wallet market as an example, research predicts cumulative annual growth of 32 % in global e - wallet transactions between 2017 and 2022. such a scale of transactions means it would simply be impracticable for some banks and e - wallet operators to effectively manage the associated risks using traditional or manual risk management approaches. 3. the third and final driver is the higher availability of regtech solutions. increasing computing powers, together with accessibility of data and applications of new technologies, have contributed to an increased commercialisation of regtech solutions available to the banking industry. 13. recognising the growing need for, and developments of, regtech solutions, we at the hkma consider it timely to work with the banking industry and the technology community to further facilitate the adoption of regtech in hong kong. to help develop the regtech ecosystem here, the hkma will open the fintech supervisory sandbox to regtech projects or ideas raised by banks or tech firms. i am also pleased to say that the hkma will soon launch a series of regtech - specific projects, through its banking made easy initiative, focusing on four areas : ( a ) aml / cft surveillance technologies ; ( b ) regtech for prudential risk management and compliance ; ( c ) study on machine - readable regulations ; and ( d ) hkma ’ s exploration of suptech. 14. let me explain each initiative in greater detail. aml / cft surveillance technologies 15. about aml / cft surveillance, one should bear in mind that the financial system is the gateway through which criminals must

s theme, “ banking for a smart society ”, reminds us not to be complacent. we should continue to work collectively to further develop the ecosystem. 9. while we naturally pay more attention to new or innovative digital financial services that become available to bank customers as a result of the smart banking initiatives, let ’ s not forget that fintech is not only about the interface between banks and customers. the importance of a key fintech segment, regtech – regulatory technology – in supporting and facilitating the interface between banks and the regulators, should not be understated nor overlooked. i would like to therefore provide a supervisor ’ s perspective on regtech in the smart banking era. 10. when we look at regtech, some may immediately start to envisage the substitution of us, banking supervisors, with technologies such as artificial intelligence ( ai ) or “ robo - regulators ”. while some of you might indeed prefer a robo - regulator delivering this speech, this is not something that regtech is intended or able to deliver at this point, unfortunately. frankly, i hope that you would still prefer listening to my sharing, rather than from a tall and handsome roboregulator, even if such a robot were a reality today. joking aside, regtech does offer a tremendous potential to complete the smart banking ecosystem. 11. before i discuss our plan for regtech, i would like to reiterate what regtech means. as i have mentioned, from the perspective of banks, there are two interfaces that they have to address : one between banks and customers, and the other between banks and the hkma. the general priority of banks under the smart banking initiatives so far has been to concentrate on the interface between banks and customers to offer better digital financial services to users. however, some meaningful progress has been made to streamline the interface between banks and their regulators, such as the work under the banking made easy initiative and the balanced and responsive supervision programme that i explained at this conference last year. we do see a need to further facilitate banks ’ use of technologies for compliance with regulatory requirements of the hkma and other regulators and for risk management purposes. regtech, which essentially means the use of innovative technologies by banks to achieve regulatory compliance or better risk management in a more effective and automated manner, is well positioned to further enhance the interface between banks and regulators. 2 / 4 bis central bankers'speeches 12. regtech developments are growing rapidly particularly in the areas of transaction