Heralding the Expanse of Fintech in Hong Kong

Heralding the Expanse of Fintech in Hong Kong

by June 10, 2020

Historically, regions such as Hong Kong and similar nations in southeast Asia have been loath to accept the merits of fintech. However, this trend has reversed markedly of late, with the Hong Kong Monetary Authority handing out licenses to eight new virtual banks as a way of encouraging further innovation in this space.

Despite this, established lenders are increasingly optimistic about their futures in the fintech era, thanks largely to their continued collaboration with financial technology startups and willingness to evolve in the digital age.

In this post, we’ll look at how the fintech market has evolved and expanded in Hong Kong, while appraising the role of regulatory relaxations and collaborations between lenders old and new.

The Growth of Fintech During the Last Year

If we look at the headline figures over the course of the last 14 months or so, we see that Hong Kong has made huge progress as southeast Asia’s fintech hub.

For example, the number of fintech firms and startups operating the region has exceeded 600 since last April, including the eight virtual banks that were recently granted licenses and four authorised virtual insurers.

Beyond this, 20 existing retail banks also launched over 300 Phase II (Customer Acquisition) Open APIs over the course of the last year or so, while Hong Kong was also proud to host the 2019 Hong Kong Fintech Week in November.

source: InvestHK

In some respects, it can be hard to identify the precise trigger for this evolution, although it can largely be attributed to the introduction of a more robust regulatory framework across all virtual asset trading platforms.

This has encouraged the widespread adoption of fintech in markets such as forex and financial trading, which has in turn benefited traders both in terms of the assets at their disposal and the fundamental way in which they trade.

On a fundamental level, this has also allowed for the sustained satisfactory usage of the ‘Faster Payment System’ (FPS) such as Trustly, which have evolved beyond markets such as iGaming to become a mainstream and accepted fintech structure.

How is the Growth of Fintech Manifesting Itself in Hong Kong?

One of the biggest manifestations of this evolution can be seen in the decision of Hong Kong to launch the region’s first regulated virtual asset fund, which is based on the principle of fintech and blockchain.

Launched by the blockchain arm of Venture Smart Asia, this is the first of several similar fund to be released onto the market. A relatively modest target of having $100 million in assets within 12 months has also been set, and this could well be a significant game changer in the Hong Kong marketplace.

As we’ve already touched on, the future of finance in Hong Kong and Asia is also likely to be dominated by partnerships between digital or challenger banks and existing financial establishments.

One of the most recent collaborations saw Hong Kong’s first digital bank (ZA Bank) partner with payment technology firm Fiserv, with the former adopting the latter’s VisionPLUS global payment software to underpin client settlement and customer service.

This is telling; as it enables the fintech startup in question to leverage a larger consumer base and propel concepts such as digital banking into the consumer mainstream. We should definitely expect to see more of these partnerships in the short and medium-term, as Hong Kong looks to establish itself as the fintech capital in Asia.

Featured image credit by Dan Freeman on Unsplash