Hong Kong targets banks with fintech boost

Hong Kong is starting to take the fight for its fintech future seriously, according to Janos Barberis, founder of fintech accelerator SuperCharger.

With Singapore attracting new fintech deals - apparently at will - the Hong Kong Special Administrative Region (HKSAR) government is responding, backing projects and implementing regulatory innovation in the ongoing quest to become Asia’s premier fintech gateway.

Barberis’ SuperCharger 2.0 is among a series of projects and policies designed to help Hong Kong survive the three-way struggle for regional financial supremacy. 

However, while Hong Kong is still recognized as among the strongest startup hubs in the world - 90 per cent of all Asia-Pacific fintech investment ($8.75 billion) last year occurred in China and the HKSAR - the lion’s share went directly to the mainland, which has itself become a fintech leader, leaving Hong Kong holding the door as the financial gateway to Asia becomes China itself.

In response, the HK government - before the ascension this week of Carrie Lam to the chief executive role - injected HK$5.5 billion into the city’s Innovation and Technology Fund and a further HK$2 billion into the Innovation and Technology Venture Fund.

In November, the Hong Kong Monetary Authority (HKMA) launched a Fintech Supervisory Sandbox to allow banks to test innovative fintech products and initiatives within a live, controlled environment, before they are fully compliant.

According to Baker Mackenzie Partner, Karen Man, unlike similar schemes introduced by regulators in other Asia-Pacific financial centres - like arch-competitor Singapore and its impressively agile Monetary Authority of Singapore (MAS) - the HKMA’s model is only available to Hong Kong-authorised institutions and not to start-ups and other unlicensed businesses.

“This is consistent with HKMA’s aim to focus on technologies that are increasingly being implemented or explored by the banking industry globally, such as mobile centred services, robotics, biometrics and blockchain/distributed ledger technology,” Man said.

Most recently, the signing of an MOU between Hong Kong and Shenzhen to jointly develop the Innovation and Technology Park, along with the opening of the largest fintech co-working spaces in Asia at the new Cyberport tech-hub, demonstrate a Hong Kong grappling with the enormity of what it takes to compete with both mainland China and Singapore.

People power

According to Barberis, as fintech in Hong Kong is maturing, human capital is what will ultimately seed HK’s fintech superstructure.

“This year we can expect a focus on human capital development. Hong Kong has quickly gone from educating its market (i.e. crowd, entrepreneurs, banks, investors) to now actually delivering work with fintech companies," he said.

“This year, with Austern Company and Standard Chartered Bank, we’re training over 40 students by directly placing them with our 8 companies and our entrepreneurs have two years of experience running a company and have launched their product or know the right stakeholders to engage with.”

Despite Hong Kong showing the highest rate of fintech uptake - according to Ernst and Young - at 29.1 per cent - followed by the United States (16.5 per cent), Singapore (14.7 per cent), Australia (13 per cent), and Canada (8.2 per cent) - Barberis observed the churn is yet to come from HK’s acceleration.

“No, we still have not fully seen the failure of few fintech companies - statistically we should have a 90 per cent failure rate. When we do we shouldn't be worried as second time entrepreneurs have more experience and are statistically more likely to succeed."

With the emergence of an increasing number of commercial PoC that are being signed between start-ups and FI, there is only an up-side for Hong Kong from now on, Barberis suggested.

“With that said, its positioning towards China needs long and careful consideration and discussion, it’s an outbound gateway in my opinion (as opposed to an inbound gateway, which is what the financial center does).”

Barberis emphasised the need for continued synergy between public and private sectors for building the city’s fintech, particularly the top talent.

“Collaboration between accelerators, financial institutions and universities is vital in fostering talented graduates to cater to the growing fintech industry," he added.

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