Government support spurs fintech optimism in Hong Kong

'Hong Kong's fintech initiatives have overtaken Singapore but are still no match for mainland China.

Hong Kong was slow off the fintech starting block, but with government support has made up for lost time. The smart money is on the Greater Bay Area (GBA) initiative, which stands to escalate recent fintech developments.

By: Kate Whitehead

Simon Loong CPA, founder and CEO of WeLab, was one of Hong Kong’s early adopters. He had 15 years in retail banking behind him when he decided to leave Standard Chartered Bank to set up a fintech company in January 2013.

“When I told my colleagues that I was starting a fintech company they were shocked: they’d never heard of the term,” Loong recalls. 

“Six years on and most banks have fintech products. We’ve really seen the ecosystem develop across different categories of fintech.”

In March 2016, the Hong Kong Monetary Authority established a Fintech Facilitation Office (FFO) to help promote fintech in the territory. In February 2018, Hong Kong Financial Secretary Paul Chan said the government would allocate HK$500 million over the next five years to support its financial services industry, including the development of fintech.

“Some people say that Hong Kong has been lagging behind, but the government has been doing a lot of things and we are now picking up momentum,” says Stanley Sum, director of KPMG China’s CIO advisory practice.

Hong Kong’s longstanding rival, Singapore, was quick to see the potential of fintech and began investing five or six years ahead of Hong Kong, Sum says. It has made good headway with fintech initiatives such as real-time payment platforms. Hong Kong has since overtaken Singapore, but it’s still no match for mainland China.

“The mainland has virtual banks, is almost a cashless society and has really innovative products,” Sum says. “They are far ahead of us and give the impression that Hong Kong is lagging.”

Regardless, Hong Kong can learn from first movers and draw on its expertise as a financial hub.

“We don’t have as many tech people as Shenzhen [in southern China], but we have lots of investors to support the ecosystem and a well-established infrastructure with banks operating on an international scale with a mature securities market,” Sum maintains.

“There is a strong base for creating different use cases for trying different propositions.”

In the past year, Hong Kong has launched new fintech initiatives, from a fast payment system to a clearing network that allows funds to be cleared instantly. The introduction of a virtual bank licence received international attention and Loong’s WeLab was among the first to apply for it.

“Only through having this government support and policy can we encourage more talent to join to make [Hong Kong] more developed and mature,” Loong says. 

“Top players in the world are coming to Hong Kong to be part of the virtual bank.”

Having operated fintech companies in Hong Kong, mainland China and Indonesia, Loong says he’s in a good position to judge the Hong Kong Government’s measures and says the city’s regulators are very supportive.

Much of Hong Kong business is now focused on the GBA (Greater Bay Area) initiative, which aims to integrate Hong Kong, Macau and nine cities in Guangdong province to develop the region and expand regional cooperation and growth. Fintech is no different. Sum says it offers a huge opportunity for Hong Kong fintech firms and on a massive scale.

“I foresee a lot of need and new expectations in the fintech services industry – for example, handling cross-border payments and helping companies run operations from a treasury perspective,” Sum says. “There are opportunities not just [for] traditional banks but also fintech companies.”

Another advantage of the GBA initiative is that it will encourage a flow of people and capital around the region, which is expected to drive collaboration. This could be particularly good for Hong Kong, which is short on fintech talent.

“Hong Kong is a financial hub and has that talent, and Shenzhen is a tech hub with tech talent – it’s [about] how we enable collaboration,” Sum continues. “From what I’ve seen in the market, there is a strong need for fintech talent in Hong Kong.”

Savvy Hong Kong fintech firms might be eyeing the GBA, but Loong says it’s important to recognise that the Hong Kong and China markets are very different. WeLab has been ranked by Deloitte as the fastest growing tech company by revenue in Hong Kong and fourth in China. One of biggest hurdles with China was coming to terms with the fact that consumer behaviour is very different.

“Being able to adapt quickly and in an agile fashion is very important [in China],” Loong says. “We run a completely different marketing and branding team in Hong Kong and China [because] having that awareness is important.”

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