Can Hong Kong recover its lost bid for the FinTech revolution?
Fri 11 Mar 2016
With its long-standing reputation as a major centre for global finance, Hong Kong is no stranger to tough competition. But while in the past it has jostled with cities such as Tokyo, New York and London for pre-eminence in traditional financial industries such as banking, stocks and currency exchange, now a new race is under way – the race to embrace FinTech.
Investment in the area has seen a huge global surge in the last two years, but the challenge to Hong Kong as it attempts to keep pace with its competitors is a daunting one. According to consultants KPMG, [PDF] of the $12.2 billion invested in FinTech in 2014, 80% of that was in the United States. Europe came in a distant second with 12%, while the whole of Asia accounted for just 8%. In an effort to redress the balance, Hong Kong’s financial secretary John Tsang Chun-Wah has called on the territory to make FinTech a priority [PDF] so it does not fall behind other financial centres.
Markus Gnirck, co-founder and Global COO of Startupbootcamp FinTech, which claims to be the largest innovation program in the FinTech industry, tells The Stack:
“Governments around the world have recognised that jobs are at risks in banks and priorities have shifted to supporting the growth of new FinTech players…Given Hong Kong’s importance as a financial hub it is surprising that it has only now announced more comprehensive plans to support FinTech. Other countries like the UK, India, Sweden and Korea have been more active in bringing various stakeholders together and have developed strategies to build a sustainable FinTech industry.”
Hong Kong’s new blood
Hong Kong’s growing contribution to the FinTech scene includes start ups such as; The CloudMiner Ltd, a web-based platform that provides in depth information on the natural resources sector for would-be investors, and NexChange (NXCH), a social networking company focused on building a network connecting the entire financial services industry, serving as a portal, organizing and providing targeted information, and providing job listings and career development resources. Oxon Consulting is also a specialist in portfolio performance reporting, helping financial institutions generate and view analytics reports to see how their products are performing, no matter where their staff are based around the globe.
Is the new investment going to put Hong Kong at the top of the tree? Or is it too little, too late?
Hong Kong needs to re-imagine itself as a financial centre
“It is hard to define a universally acceptable FinTech hub ranking,” says Janos Barberis, CEO and founder of FinTech HK, an organisation which aims to be a single point of contact for Hong Kong’s FinTech scene. “Whilst there is no doubt that London is leading the pack globally,” Barberis tells us. “within Asia you have a cluster – Hong Kong, Singapore and Sydney – that is very close to each other. So Hong Kong is on par within Asia.”
Plans announced by John Tsang Chun-Wah to enhance Hong Kong’s FinTech output include a support programme to create 150 start-ups over the next five years, centred around the city’s Cyberport digital incubation site. There will also be training provided at overseas universities for 300 Hong Kong university students.
Investment will also be made in Blockchain – the database technology that underpins Bitcoin – which he said would help to reduce suspicious transactions and bring down transaction costs.
He further suggested setting up a specialist team to organise major international FinTech events. “The secretary is absolutely right to prioritise FinTech,” Barberis added, “Hong Kong needs to re-imagine itself as a financial centre.”
One man charged with helping to produce the next generation of Hong Kong’s business leaders is Dr Wilson Chan, associate Director of the City University of Hong Kong’s MBA programme and the honorary president of the Macao Technology and Culture Society.
Chan tells us: “If Hong Kong doesn’t invest in this infrastructure development today, it would fall behind other markets and countries tomorrow. At the same time, all the services of e-finance would easily be provided by other countries.”
Fortunately for Hong Kong, it does have advantages over other financial centres – such as its unique history that helps bridge the West’s business community with China – which Chan says could help make it a hub for FinTech development in coming years. He particularly singled out QianHai (image right) – a business district currently under construction in the Chinese city of Shenzhen and described as ‘China’s answer to Wall Street’ – which is aimed at fostering closer cooperation between Hong Kong and the mainland.
He said: “Hong Kong is extremely close to it (QianHai) so it will help Hong Kong’s development and training.”
The future for FinTech in Hong Kong
So what innovations are expected in the coming year and beyond?
Gnirck sees two major developments going forward, the emergence of more niche industries within FinTech, and a possible land grab by the major players seeking to buy up more of the industry.
“We will see more sub industries emerge, also dependent on location. Europe and the US will see mostly B2B businesses, Asia and Africa will be full of more B2C financial inclusion companies. Additionally, the flirting between FinTechs and banks to close partnerships is over. Instead, M&A (mergers and acquisitions) activities are starting to happen to take out competition or take control of full integration.”
Barberis highlighted ‘the consumer centricity’ of new products which he said would empower a new generation of young entrepreneurs alongside experienced bankers. Chan said further developments in e-statements and e-investment platforms for stocks and Forex margin trading would be trends to watch.