The Hong Kong government will be allocating HK$500 million over the next five years to support its financial services industry, including the development of fintech, Hong Kong’s financial secretary Paul Chan said on February 28.
In his annual budget speech, Chan pledged to support technology and innovation, recognizing IT as “an economic driver in the new era.”
“Hong Kong must optimize its resources by focusing on developing its areas of strength, namely biotechnology, artificial intelligence, smart city and fintech, and forge ahead according to the eight major directions set out by the chief executive,” Chan said.
HK$500 million will go toward the development of Hong Kong’s financial services industry, providing support for bond market development, fintech, green finance, manpower training and other aspects of financial services, he said.
But more broadly, Hong Kong will dedicate as much as HK$50 billion to “invest in the future.” The money will go toward a long-term tech and innovation push with a focus on helping innovative and creative industries, Chan said.
The sum includes an injection of HK$20 billion into the Hong Kong-Shenzhen Innovation and Technology Park, HK$10 billion into the Innovation and Technology Fund (ITF), HK$10 billion to support the establishment of two research clusters on healthcare technologies and on artificial intelligence and robotics technologies, HK$10 billion to the Hong Kong Science and Technology Parks Corporation (HKSTPC), HK$200 million to Cyberport to enhance the support for startups and promote the development of digital technology ecosystem, and another HK$500 million under the ITF to implement the Technology Talent Scheme.
Investment in Hong Kong’s fintech sector more than doubled in 2017 compared to 2016, jumping to US$546.7 million from the previous year’s sum of US$215.5 million, according to an Accenture analysis of data from CB Insights. 2017’s largest fundraising was WeLab, an online lending firm, which raised US$220 million in November.
Musheer Ahmed, interim general manager of the Fintech Association of Hong Kong, said banks’ adoption of fintech and government support in the past two years have made Hong Kong’s fintech industry more attractive to investors.
“Banks went from being skeptical about fintech, to realizing it can be beneficial to them. Following on from this, they moved from reviewing proofs of concept to actual implementation and adoption of fintech solutions, meaning start-ups now have a steadier revenue stream, making them more attractive,” he told the South China Morning Post. “Secondly, the Hong Kong government and regulators now have a more active agenda to push for innovation across sectors, as highlighted in Wednesday’s budget speech, particularly in fintech.”
The statements come on the heels of the release of guidelines for the launch of virtual banks in Hong Kong.
Virtual banks looking to set up in the city will need to have at least HK$300 million in capital, and cannot impose a minimum account balance or low balance fees, according to draft guidelines by the Hong Kong Monetary Authority. The authority will also require them to set up a locally incorporated bank to offer retail banking, have at least one physical office that can also handle complaints, and have an exit plan in case of a collapse.
“Overseas experience has shown some successful virtual bank operations, while small and medium enterprises could get better banking services and lending,” Arthur Yuen, the deputy chief executive of the authority, said in February.
“We expect virtual banks will focus on retail and SME businesses, but we will not require what type of services they must offer to customers. They could choose their business scope, ranging from payments, deposits and loans, to wealth management and other lending.”
The regulator is welcoming feedbacks on the proposed guidelines until March 15. The final regulations will be issued in May. Non-financial institutions and banks can already apply for the license.
Featured image: Paul Chan, via GovHK.