【Wall Street Journal】HONG KONG: COMMAND CENTRAL FOR ASIA’S FINTECH REVOLUTION
Strong public-private support is spurring leapfrog growth for Hong Kong as a world leader in fintech innovation in areas such as e-banking and e-payments.
A recent example: the granting of eight virtual bank licenses by the Hong Kong Monetary Authority (HKMA) that allows newcomer e-banks to offer a full range of banking services on a purely digital basis.
The e-payment scene has also been active, with 15 licenses granted since 2016 and double-digit annual growth both in the number of new accounts and usage rates.
In late 2018, the HKMA launched the Faster Payment System (FPS), which not only provided a mega-boost for e-payment infrastructure but also became a global exemplar. As of early July 2019, 22 banks and 10 e-wallet operators in Hong Kong are participating in the FPS system.
“The FPS is an extremely powerful platform for e-payment development,” says Howard Lee, HKMA deputy chief executive for monetary management, financial stability surveillance and financial infrastructure. “It is the world’s first real-time payment platform that connects banks and e-wallet operators for instant HKD and RMB retail transfers anytime and anywhere. It’s a game-changer.”
Since its debut, the FPS has seen widespread adoption, with 3 million registrations and 89,000 average transactions daily. “This is all part of the HKMA’s mission to enhance the competitiveness of our financial sector by promoting and enabling fintech development while exercising prudential regulation,” says Mr. Lee.
MASSIVE GROWTH IN FINTECH ADOPTION RATES
According to the EY Global FinTech Adoption Index 2019, China and India have the highest consumer adoption of fintech globally at 87% while Hong Kong currently rates at 67%—more than double the 32% reported in 2017.
What’s behind the strong growth in fintech adoption? “One reason,” explains James Lloyd, Asia Pacific fintech and payments lead at EY, “is that incumbents have entered the fray in a big way. Markets with a sharp rise in adoption, like Hong Kong, reflect the availability of fintech services offered by banks, insurers, stockbrokers and other incumbent financial institutions.”
The most popular category is money transfers and e-payments, with 75% of consumers globally using at least one service in this category.
“From the new FPS to the authorization of virtual banks to digital insurance fast-tracking—Hong Kong is positioning itself as a leading fintech hub from which to build regional and even global propositions,” says Mr. Lloyd. “Hong Kong’s fintech ecosystem is entering a most exciting phase of development.”
PLAYING TO HONG KONG’S STRENGTHS
Syed Musheer Ahmed, the general manager of the FinTech Association of Hong Kong, says the city’s strengths lie in its position as “Asia’s financial capital”, where 75 of the world’s top 100 banks have operations.
The Guangdong-Hong Kong-Macao Greater Bay Area (GBA) reaffirms Hong Kong’s role as a gateway for firms looking to enter Mainland China while, in the opposite direction, also serving as a launchpad for Mainland Chinese firms looking to expand internationally—helped along in both scenarios by Hong Kong’s long-standing policy on the free flow of goods, capital and information.
“As the super connector between East and West and the world’s top market for IPOs,” says Mr. Ahmed, “Hong Kong’s fintech ecosystem needs to continue to focus on developing scalable innovation along with inclusive technology that will enable firms from across the world to use it as their launchpad for regional expansion.”
THE APPEAL OF HONG KONG
Chicago-based fintech consulting firm Enfusion came to Hong Kong in 2015, drawn by the city’s then-nascent fintech buzz. “We saw a good market opportunity in Asia, which we couldn’t ignore,” says director Bob Feng. “Hong Kong is one of the most active, well-established financial markets around the globe and a key part of the Greater Bay Area, so we decided to come here and start our Asia business.”
Enfusion established its APAC headquarters in Hong Kong’s bustling central business district with a view to tapping into business opportunities in the much larger GBA, which has a population of about 70 million and a combined GDP about the size of Korea.
“Several China tech giants already headquarter in GBA, and we don’t want to be left behind,” says Mr. Feng. “We expect more business from the region, and we plan to expand our footprint in Mainland China through our base here.”
According to Mr. Ahmed, the continued growth of the GBA’s fintech sector requires that local officials and regulators work together smoothly to ensure that people, capital and goods move with ease. “We’ve already initiated the establishment of an Inter-Association Collaboration Group to advocate for policy to help facilitate the change needed to promote the region as a global center of fintech,” he says.
Hong Kong, with its thriving fintech eco-system of accelerator programs, more than 550 fintech companies and over US$1 billion private investment in the sector locally is well placed to lead the GBA as command central for globalizing fintech innovation.