HONG KONG FINTECH SCENE / A INNOVATION LAUNCHPAD FOR GREATER CHINA
This post is a minor edit with added analysis from the HK Steering group report to foster fintech innovation in the area.
Whereas Hong Long will be a separate system from The People Republic of China until 2047, it can be seen as a testbed of many innovations that the Greater China would like to scale to benefit the growing population of the mainland. The country also sees to bolster the capital market role of HK as any entrepreneurial kickoff would be seeing major investors not too far from the launchpad. Hong Kong’s competitiveness as an international financial centre is well-recognised: the Global Financial Centre Index published by Z/Yen Group in September 2015 ranked Hong Kong as the third most competitive global financial centre among 84 major centres in the world, behind only London and New York, and considered her the leading financial centre in Asia.
Leveraging the trade routes, commercial renome and capital market clout, HK is now looking carefully and strategically at the fintech space. As part of a recent report on the fintech market development, the HK Government established the Steering Group on Financial Technologiesin April 2015 to advise on how to develop Hong Kong into and promote Hong Kong as a Fintech hub.
The Steering Group sees several major areas of focus that are all tied in to one large goal of building a sustainable fintech ecosystem:
Facilitation: better matching of resources available and demand by Fintech companies (such as the landscape of co-working spaces, incubator and accelerator programmes, and innovation laboratories) and facilitation offered to talents and startups to start/expand their businesses;
- To establish a One-stop Office to provide targeted assistance to startups, leverage the Office in the overall branding for Hong Kong as a Fintech hub as well as take part in overseas events and organise roadshows to showcase different support measures available in Hong Kong
- To establish a Fintech-themed programme to complement existing facilitation programmes
- To attract financial institutions to locate/start their accelerator programmes and laboratories in Hong Kong
- To raise Hong Kong’s position as a hub for applying and setting standards for cutting-edge Fintech technologies such as cybersecurity and Blockchain
Regulations: how the regulatory framework can better keep up with the fast evolving technological environment, and channels to enhance the Fintech sector’s understanding of the regulatory environment;
Talents: how to promote the participation of existing financial institutions and financial services professionals in Fintech and nurturing entrepreneurship and a startup culture among graduates and young professionals;
Funding: any major gaps in funding for startups along different development stages and to improve dissemination of information on funding sources
Promotion: to formulate a clear vision to underline Hong Kong’s commitment in developing Fintech and our position as a launchpad for Fintech companies with regional and global ambitions as well as to organise an annual premier Fintech event and competitions to focus stakeholders on the potential of our Fintech ecology and attract talents locally and from outside Hong Kong.
Talents: to encourage young talents to consider entering the Fintech sector and to enhance dissemination of information on immigration policy for talents outside Hong Kong.
Focus
(a) digital payment and remittance;
(b) financial product investment and distribution platforms, including fund distribution platforms and robo-advisors;
(c)peer-to-peer (“P2P”) financing platforms, including P2P lending and equity crowdfunding platforms;
(d) cybersecurity and data security technology;
(e) big data and data analytics to support both front-office and back-office operations;
(f) distributed ledgers, including application of the Blockchain technology to new asset classes and processes.
Fintech startups have made good headway in Hong Kong in recent years, thanks to our maturing ecology. According to a survey conducted by InvestHK in 2015, co-working spaces, incubators and accelerator programmes in Hong Kong have increased from three such facilities in 2010 to 35 in November 2014 and 40 as of August 2015. Pollings of operators of these 40 co-working spaces, incubator and accelerator locations in Hong Kong by InvestHK indicated that the number of startups registered in their premises jumped 46% in less than a year to 1,558 in mid-2015. Among the startups, 86 of them are engaged in Fintech, up 16% from late 2014. Moreover, 48 out of 100 top Fintech companies in the world are already operating here, complementing the cluster
Source: Report of the Steering Group on Financial Technologies
Among the developments:
Accenture and Cyberport have, for two consecutive years in 2014 and 2015, organised the FinTech Innovation Lab accelerator programme in Hong Kong, which is Accenture’s third programme worldwide following the two previous launches in New York and London
DBS Hong Kong and NEST (a professional firm specialised in startup investment and incubation) introduced the DBS Accelerator in April 2015 to support startups to deliver innovations and technologies in Fintech
KPMG’s “Insights Labs” set up a branch in Hong Kong in 2015 as a virtual R&D centre that incubates and develops data-driven business solutions for KPMG’s clients locally and across the region, especially Mainland firms that are coming to set up in Hong Kong
Standard Chartered, in partnership with Baidu and Tuspark HK, is sponsoring the SuperCharger Fintech Accelarator Programme that caters to both growth- stage startups and mature-stage global Fintech companies
Commonwealth Bank of Australia expanded its CommBank Innovation Lab to Hong Kong in January 2016 to provide space for its staff and customers to collaborate in exploring ideas, testing new concepts and developing solutions
InvestHK launched Startmeup.hk in 2013 as a one-stop portal to the startup community in Hong Kong, listing the latest startup events and various resources including government incentive and incubation schemes, accelerator programmes, angel investors and venture capital funds. Fintech has been identified as one of the sectors to be promoted by the Startmeup.hk initiative.
Hong Kong is also a key fundraising and asset management centre in Asia. The Stock Exchange of Hong Kong has been among the top five global initial public offering listing markets every year for the past decade, and ranking first globally in 2015 (with HK$261 billion raised). According to the Securities and Futures Commission (“SFC”)’s Fund Management Activities Survey, the size of the combined fund management business (including private banking) is estimated to be HK$17.7 trillion in 2014. Hong Kong’s assets under management (“AUM”) are the largest in Asia and the investor base is diverse and global with investors from outside Hong Kong accounting for 71% of the AUM. Moreover, the Hong Kong financial services industry is both competitive and well-connected globally: 74 of the world’s 100 top banks are operating in Hong Kong (as at end September 2015), according to HKMA.
Major plans for Hong Kong progress in fintech have also been announced in a 2016 Budget speech:
The Enterprise Support Scheme under ITF will provide financial support to Fintech start-ups and financial institutions. The Cyberport will set aside a dedicated space of 3 000 square metres in its co-working space Smart-Space, and roll out a designated programme to provide support to 150 Fintech start- ups over the next five years. In addition, it will arrange for 300 university students to join Fintech training camps in overseas universities to gain more in- depth understanding of the career prospects in the sector.
The Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC) and the Office of the Commissioner of Insurance will set up Fintech dedicated platforms to liaise with the industry to ensure that the market will balance between market demand and investors’ understanding and tolerance of risk when introducing innovative financial products and services.
Consumer protection is an important consideration in Fintech development. The Payment Systems and Stored Value Facilities Ordinance, which came into effect last year, has enhanced consumer protection. HKMA is working with the Hong Kong Applied Science and Technology Research Institute, the Hong Kong Institute of Bankers and the Hong Kong Association of Banks to set up a cyber security programme, including the establishment of a cyber intelligence-sharing platform, and the conduct of risk assessment and professional certification.
E-commerce is booming in Hong Kong, with sales doubling from $140 billion in 2008 to $280 billion in 2012. To meet the demand for logistics services brought by electronic trading, Hongkong Post will capitalise on its network to enhance the counter collection service for online purchases. In the first half of this year, Hongkong Post will install self-service collection lockers in the community to make it more convenient for members of the public to collect their online purchases. 320 000 SMEs employing 50 per cent of all citizens.
