P2P lending and digital lending has been on the rise lately, with many countries moving to regulate the space. Conventional digital lending has been met with far less controversy than its counterpart P2P lending.

While P2P lending has been created in the spirit making it easier to access capital and as an alternative form of investment, it has morphed into something quite ugly of late.

The poster boy of that is of course China, with hundreds of platform crashing and leaving many of its user stranded. In some instances it destroyed the lives of some families and tragically even led to suicide.

Contrasting that grim state of things in China, Hong Kong’s P2P lending scene is relatively tamer.  P2P lending businesses in Hong Kong is regulated under the Money Lenders Ordinance, (in lieu of more formal regulations) which provides some form of protection against excessive interest rates and unsavoury behaviours.

P2P lending and digital lending poised for growth in Hong Kong

Hong Kong is indisputably one of Asia’s biggest and most important financial services hubs with about 220,000 people employed in the sector that contributes 18% to Hong Kong’s GDP.

In spite of being a leading financial hub, consumer lending has not always been popular in Hong Kong. According to Euromonitor International, a provider of strategic market research, this is partly due to the conservative nature of the local consumer.

But things are slowly changing and shifting demographics and economic conditions are helping many warm up to the idea of P2P lending and digital lending in Hong Kong.

The firm notes “the explosive growth in consumer lending” in recent years, a trend that’s been largely driven by the accessibility of loans to consumers created by the fintech community.

In 2018, 87% of the local population has access to the Internet, making online consumer lending immensely accessible, Euromonitor International claims. By simplifying processes and offering affordable loan options, the fintech sector has been able to address consumer concerns and meet the growing demand for consumer lending services.

As consumer lending continues to grow, the prospects for digital lending and crowdfunding platforms look positive, the firm said.

It forecasts that the consumer lending outstanding balance will reach HK$2,729 billion (US$352 billion) in 2023, adding that according to trade sources, non-bank lenders, including online lending platforms, will contribute up to 25% of Hong Kong’s consumer lending outstanding balance, up from 18% in 2018.

Hong Kong’s lending industry

Hong Kong’s fintech industry has been largely focused on a few specific segments including insurtech, blockchain technology, cybersecurity, payments, regtech and open banking.

Though digital lending and P2P lending is not a segment that’s particularly been developed in Hong Kong, the city does have an online lending industry that has witnessed its own success stories.

WeLab, Hong Kong’s home-grown fintech unicorn, is one of Hong Kong’s leading online lenders. The company operates Wolaidai, one of China’s leading mobile lending platforms, WeLend, Hong Kong’s leading online lending platform, and AWDA, a fintech joint venture in Indonesia, and has been recognized as one of Asia’s hottest fintech startups.

WeLab is now aiming to be listed on the Hong Kong Stock Exchange (HKEX) and is seeking a virtual banking license from the Hong Kong Monetary Authority (HKMA) to expand its services and “become a full services bank,” Simon Loong Pui-chi, the founder and chief executive of WeLab, told the South China Morning Post in May 2018.

A notable P2p lending player is MoneySQ, which is said to be Hong Kong’s first online crowdfunded lender designed for professional investors. Besides its P2P lending business, MoneySQ has been working with Deloitte to create trustME, a blockchain-based platform that allows small and medium-sized enterprises (SMEs) in China, Hong Kong and Taiwan to optimize business processes.

There’s a sizeable number of players operating in this space in Hong Kong which we’ve mapped out here. A full list of players in South East Asia can also be found here.

Editors Note: A correction has been made, WeLab is now correctly described as a digital lender instead of a P2P lender.

Featured image:Screenshot from Simon Loong’s Youtube