Hong Kong has great potential to become a fintech hub

Rage Comment : Mainland China is in a leading position in the global financial technology field. The Hong Kong Monetary Authority is also open to emerging financial technologies. With the favorable conditions provided by the mainland and the technological development environment in Hong Kong, it is expected to become a gateway for large companies to enter and exit the huge Chinese market, as well as a center for many financial technology companies.

Translation: Annie_Xu

Hong Kong's fintech industry is on the rise, and analysts point out that Hong Kong will leverage mainland China's leadership in the global fintech field.

This month, Hong Kong Chief Executive Leung Chun-ying delivered a policy address in which he said Hong Kong aims to become a "center for cutting-edge financial technology application and standardization" and the government has invested HK$18 billion (US$3.3 billion) to promote innovative technology.

"The financial technology industry, research institutions and regulatory authorities are actively studying some Internet security and blockchain projects and building a talent pool."

The popularity of fintech is evident in Hong Kong’s inaugural Fintech Festival Week in November and the recent Fintech Finals 2017, a two-day event featuring panel sessions from global industry experts and competitions between fintech startups.

The government has also made regulatory changes, and the increase in consumer applications has also led to greater government support for the technology.

The Hong Kong Monetary Authority (HKMA) issued licenses to the first five stored value payment facilities in August last year to better regulate the expanding electronic payment business.

Henri Arslanian

A month later, HKMA announced the Fintech Innovation Hub, which allows banks, start-ups and central bank representatives to work together to develop and test fintech ideas. Henri Arslanian, director of fintech and regulatory technology for China and Hong Kong at PwC, said, "After three years of development, the Hong Kong fintech community has matured."

“It used to be a handful of passionate people around a dinner table. Now there’s a whole ecosystem of regulators and governments, banks, entrepreneurs who are all actively involved in building the community.”

In his closing speech at the Fintech Finals 2017, Charles Ng, director of Invest Hong Kong, the agency that attracts foreign direct investment, said Hong Kong provides a good growth environment for fintech startups.

"Hong Kong has a strong market-driven fintech financing center, different accelerators and innovation labs, and Cyberport has the largest Smart Space Fintech."

James Lloyd, EY's head of fintech for Asia Pacific, said Hong Kong has all the conditions to become an international center in this field. "Hong Kong is the world's third largest global financial center. Hong Kong hopes to develop local technology talents while attracting technology talents from the mainland."

Charles Ng

He said that there is abundant capital here and as a global trading center, there is room for the development of new technologies such as blockchain. Blockchain can be used to build secure and reliable digital contracts, making transactions more cost-effective.

Hong Kong’s unique advantage is its access to and from the Chinese market, and it is also the birthplace of many high-value financial technology companies.

These include Ant Financial, the arm of e-commerce giant Alibaba, Lufax, the largest peer-to-peer lending platform in mainland China, and JD Finance, the arm of e-commerce company JD.com.

Hong Kong has attracted international fintech companies to enter the mainland market, and China is the main driver of fintech in the Asia-Pacific region.

Albert Chan, director of Accenture's financial services business in China, said, "In the first three quarters of 2016, fintech investment in the Asia-Pacific region was nearly US$10.5 billion, more than double the full year of 2015, with mainland companies participating in most of the investment. This is more than the US$2 billion in Europe and US$6 billion in the United States during the same period."

According to an Accenture survey, in the first seven months of 2016, the top 10 fintech investments in Asia Pacific were in China and Hong Kong, accounting for 90% (US$8.75 billion) of the total investment in the Asia Pacific region.

Lloyd said that the mainland is undoubtedly a global pioneer in financial technology, which is a good sign for Hong Kong and can become a springboard for many large companies to break out of China.

"We traditionally view Hong Kong as the gateway to the mainland, but in the field of financial technology, I believe that Hong Kong's opportunity lies in becoming a gateway to break into the mainland market."

He took Alipay as an example, which started in Hong Kong and became one of the top five licensed providers of stored value payment tools, allowing it to provide services in offline areas such as convenience stores.

WeChat Pay is also one of the five major licensees.

Lloyd said, "This is a good indicator of Hong Kong's potential. As these mainland companies seek to internationalize, can Hong Kong serve as a springboard? There are great opportunities here."