Will Hong Kong dethrone London’s FinTech Supremacy
When London is on the verge of losing its tech hub status, it certainly bodes well for Hong Kong, which is hunting for financial technology companies. It’s an opportune time for Hong Kong to attract London based FinTech companies as many of them are thinking of wrapping up their businesses in the wake of uncertainty due to UK’s vote to stay away from the European Union.
In last year’s budget, Hong Kong government had formed a committee, knows as Steering Group of Financial Technologies, with the purpose to pay attention to FDIs in cyber security, financial transactions, and regulatory technologies.
The committee along with Invest Hong Kong (InvestHK), a government department founded in July 2000 to make Hong Kong Asia’s leading business center, has appointed representatives in London and New York to identify established and upcoming FinTechs and convince them to open bases in Hong Kong. It is expected that it will now speed up its efforts to attract companies from the UK to its jurisdiction.
But does Hong Kong have all necessary ingredients to become a center of FinTech innovation and growth?
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Experts believe that Hong Kong can provide a better ecosystem than London, New York or any other place in the world due to several reasons, prominent among them are its historically strong business and commerce base and its positioning as a gateway to China which can allow its access to wider Chinese market. It is important to mention here that China is home to some of the world’s biggest and most exciting FinTech developments, and its peer-to-peer lending industry has grown almost 13-fold since 2012, according to a study by KPMG. The growth of Mega-financial establishments from China stands testimony to the depth of the market and investor appetite in this sector, thereby providing motivation for Honk Kong?s FinTech players.
In Hong Kong,? the FinTech companies flourish in an environment of entrepreneurship, and being the hub of finance and banking institutions gives a further boost to the FinTech ecosystem. In addition to this, a well-educated population and adequate incubation and accelerator opportunities provide a sound basis for the FinTech start-ups.
Investments in start-ups is a lesser a challenge because both government and private sector come forward to sponsor or boost entrepreneurs for their innovative efforts. A lot of good companies offering alternative financial services such as equity crowd-funding, wealth management, peer-to-peer lending, e-payment and remittance services are already operating from Hong Kong, which is a proof of the city’s favorable ecosystem for FinTechs.
According to a survey by Invest HK, the number of start-ups went up 46 percent in 2015 when compared with 2014. The rise in Fintech startups in 2015 was reported to be 16% up from 2014. Regarding numbers, total 1558 start-ups out of which 86 were FinTechs were running by the end of 2015 in Honk Kong.
The year 2016 started on a very positive note especially for fledgeling FinTechs as the government announced a lot of measures to address their concern. Based on the recommendations of the Steering Group on Financial Technologies – which had advocated assistance to FinTech start-ups, the invitation to financial institutions to base their incubators in Hong Kong and encouraging talented youngsters in FinTech sector ? government is contemplating active policies to implement them.
In March this year, the Hong Kong Monetary Authority (HKMA) opened the FinTech Facilitation Office (FFO) to assess and provide all the elements of a healthy eco-system for FinTechs. The sole purpose is to promote Honk Kong as a FinTech hub initially in Asia and then take it to the world stage.
While UK, US, China, etc. have the regulatory mechanism in place especially for FinTech startups Honk Kong too fair well on that count. It has some regulations depending on the category of services FinTech companies offer. Regulatory authorities established under the various ordinances such as the Money Lenders Ordinance, the Banking Ordinance, the Securities and Future Commission Ordinance, etc. work in close cooperation to serve the interest of the FinTech companies.
As far as regulating FinTech is concerned, since it’s an emerging business venture with heavy reliance on new technological advancement, each country including US, UK or China, is doing their level best to provide supportive regulatory measures and keep pace with the new development.
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For instance, China might not have a single regulation for FinTechs and multiple authorities play regulatory roles, but their efforts have been so well coordinated and harmonized that fledgeling companies get a good growth prospect. Experts say that effective control is necessary for sustained development and healthy competition.
KPMG, in its last year?s report on Hong Kong FinTechs, gives a positive outlook saying that it is located in the heart of the world’s largest opportunity for FinTech growth. “Already, 600 million digital banking customers live within five hours flight of the city; by 2030, that figure is expected to have risen to 2.4 billion. Its financial sector already offers a pool of 230,000 people. It has sufficient access to funds, and its university system has grown several-fold in the last two decades,” the report says.? It also suggests that Hong Kong’s eight main international rivals are Singapore, Sydney, Tel Aviv, London, Berlin, Dublin, New York and Silicon Valley.
But the best part is that the government itself has taken up this challenge with publically declaring its intention to turn Honk Kong into a global FinTech hub. This approach will encourage private investors and venture capitalist from other countries to pump in more money in Hong Kong?s FinTech start-ups.