A Snapshot of Fintech in Hong Kong in 2019

A Snapshot of Fintech in Hong Kong in 2019

by May 23, 2019

Hong Kong is expected to see a boost in fintech activity after a relatively disappointing year in 2018 as the region saw a sharp dip in the total value of investments.

According to Accenture, this was due to new measures put in place by Hong Kong regulators, resulting in a wait and see attitude that saw investors being more cautious than usual. The consulting firm also added that it expects to see fintech making a strong comeback this year.

This contrasted to its seemingly much more successful mainland sibling, who instead saw a surge in funding last year and number of fintech unicorns.


Image Credit: Whub Hong Kong Fintech Report

Hong Kong startup community platform WHub recently released a report that outlined the region’s fintech landscape, which details the edge Hong Kong has compared to the rest of the region.

For years Hong Kong has been recognised as one of the top three financial hubs in the world, topping the charts in Asia. This is thanks to its robust legal framework as well as its strategic location in the region

Hong Kong’s regulators have been ramping up efforts in recent years in attempts to attract fintech investments into the region.

Government Initiatives to Drive Fintech in Hong Kong

The Hong Kong Monetary Authority (HKMA) has implemented seven initiatives aimed to boost fintech development. This includes the launch of the Faster Payment System, where users can make payments using just mobile phone numbers or email addresses.

Other initiatives include building the framework for open API, and strengthening the Fintech Supervisory Sandbox, both aiming to encourage innovation and provide support for implementation.

Besides the HKMA, the Securities and Futures Commission (SFC) has established the SFC Fintech Contact Point to help businesses understand the framework and regulatory environment in Hong Kong. The SFC is also looking at developing a new regulatory framework for crypto funds and crypto exchanges in Hong Kong.

trustme blockchain regulators smart city government hkma government

Image Credit: Wikimedia Commons

Similar to the HKMA, the SFC also launched regulatory and insurtech sandboxes to facilitate pilot trials of various fintech initiatives to help companies develop their platform and identify any potential issues.

The government also has a list of funding schemes available, including the Innovation & Technology Fund, HKSTPC Corporate Venture Fund, Innovation and Technology Venture

Fund (ITVF), as well as the Enterprise Support Scheme (ESS). All the funds aim to give universities, companies or organisations a boost to develop their fintech products.

Rise of Virtual Banking in Hong Kong

The rest Asia is paying close attention to Hong Kong’s virtual banking scene. Among its 8 licensees are big names like Ant Financial, Tencent, Xiaomi and WeLab. The jury is still out on whether or not HKMA’s virtual banking regulatory framework is too restrictive or if it has striked the perfect balance.

Image Credit: AlipayHK

With new players entering the market simultaneously also comes the need for talent and Hong Kong is facing severe talent shortage in the realm of fintech.

In the short term, Hong Kong would need to look overseas to fill that talent gap. Which is all well considering that the region is considered one of the top 5 most appealing place to work for foreigners, thanks to its effective and expeditious immigration policies.

Hong Kong’s Geographical Advantage

One of the key aspects that make Hong Kong an appealing place for investment, is thanks to its location within the region. Being in a “One Country, Two Systems” environment, many investors see Hong Kong as the foot in the door to China.

Hong Kong is also located fairly close to other countries. This means the special administration region is accessible from many neighbouring country within a five hour plane ride, making it inherently convenient for expansion and international growth.

On top of geographical boundaries, a few of cooperative projects are also strategically places within close proximity to the Cantonese speaking region. This includes the Greater Bay Area Initiative (GBA), an initiative to link the cities of Hong Kong, Macau, Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Huizhou, Jiangmen and Zhaoqing into an integrated economic and business hub.

Cities of the GBA, The GBA Fintech Report 2019: Hong Kong- Macau-Guangdong Greater Bay Area Fintech Analysis & Recommendations, The Fintech Association of Hong Kong, April 2019

Another cooperative is the Guangdong Pilot Free Trade Zone (GDFTZ), that uses Guangdong, Hong Kong and Macau as gateway for foreign trade and investment to access the mainland. China and Hong Kong also signed a free trade agreement, CEPA, allowing local companies’ preferential access to the Chinese market. Finally, there is also the ambitious Belt and Road Initiative that aims to develop a global economic corridor and interconnected infrastructure network.

All these cooperatives encourages investments and cross border collaboration and innovations to help boost the fintech scene in Hong Kong by providing access to international markets, and increasing company presence, while also reducing regulatory red tapes during operations.

Poised For Growth?

Despite the slowdown in investment in 2018, Hong Kong’s fintech initiatives is slowly gaining traction. It is now home to a sizeable number of innovative startups with lofty goals to shake things up in the financial services world.

Fintech Hong Kong Map

Image Credit: Whub Hong Kong Fintech Report

However, future prospects might change if Hong Kong doesn’t embrace fintech the way its mainland counterpart does. According to the Global Financial Centres Index (GFCI) 25 report, Hong Kong is slowly losing its position as the financial darling in the region, with Shanghai and Singapore garnering more attention for their future plans.