Hong Kong’s future lies with fintech, and it will be bright

Hong Kong is the gateway for Chinese companies to launch internationally, and companies seeking to reach China and Southeast Asia
China is the only major economy expected to grow this year, and represents a big opportunity for Hong Kong fintech

King Leung

Published: 10:15am, 23 Aug 2020

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Whether it was the UN trade embargo on China in the 1950s and 1960s, the manufacturing decline in the 1970s, Black Monday, or the many twists and turns since then, Hong Kong has been remarkable for its ability to transform itself through moments of economic crisis.

Today, the city is uniquely positioned among mainland China, Southeast Asia and the rest of the world. It is the gateway for Chinese companies to launch internationally, as it is for companies seeking to reach China’s 1.4 billion people, Southeast Asia and beyond.

This is a geographical advantage that inadvertently belongs to a post-pandemic era as scale becomes one of the most important success factors for fintech companies. Effective delivery of financial resources to massive populations through electronic channels has become paramount.

This puts Hong Kong at the start of a long-term transformation in how people across Asia access their money, and this is likely to be a driving force of positive economic change for the region’s one-billion-plus unbanked population.

Hong Kong’s fintech sector is primed for this moment. Consumer adoption took off at what was perhaps the earliest stage possible, with one of the world’s first smart contactless payment systems, the Octopus card. Yet the sophistication of the city’s smart banking system and high penetration of fintech often escapes the notice of the average critic.

For this reason, our economy should be treated as a subject of careful inquiry, with fintech credentials that sit at both ends of the spectrum. When we think of this year in Hong Kong’s history, we should not interpret the coronavirus-induced recession as the catalyst for this digital transformation. It was already well under way.

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Hong Kong was already taking steps to boost competition across mainstream applications, by leading Asia through a revolution in virtual banking. Hong Kong has also, for many years, been the launch pad for fintech companies seeking to innovate and scale up across Asia.

The recalibration of Hong Kong towards this market opportunity is happening very fast. For example, the Fintech Anti-Epidemic Scheme for Talent Development (FAST), a subsidy plan of US$15.5 million, has been launched to enrich Hong Kong’s talent pool.

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We are at the beginning of a long recovery process, but businesses are confident they will emerge with the ability to scale up, and will access strong talent, capital and the infrastructure they need to remain relevant and competitive in the future.

Since the outbreak, consumers, banks and insurers have been working hard to try new things. Mobile services like HSBC’s PayMe and Faster Payment System are just a few examples of broad-based adoption that have been making an impact. This positive attitude to experimentation is in the DNA of Hong Kong, and it is this that will position Hong Kong to take advantage of Asia’s demographic dividend.

This applies to all areas of financial services. A recent study by the Hong Kong Monetary Authority released this year found that 86 per cent of incumbent banks are progressively integrating fintech applications across all types of financial services, and all incumbent banks intend to introduce one or more fintech applications to their business in the next five years.

Companies, regulators and the government alike are making the most of Hong Kong’s unique position to scale up on the mainland, in the Greater Bay Area in particular, and in Southeast Asia – the largest, most dynamic fintech markets in the world. Considering the uncertainty faced by most economies, this enormous upside presents a once-in-a-generation opportunity.

As for what comes next in the post-pandemic world, Hong Kong, China and Asia’s emerging economies are the outliers in the International Monetary Fund’s largely negative growth forecast for the next two years.

Asia is now poised to lead. Despite the headwinds, China is the only major economy with a positive forecast for this year, and if any city has the required set of capabilities to benefit from a post-pandemic opportunity, it is Hong Kong.

Given the city’s world-class regulatory regime and leading capital market, this is the year fintech will supercharge Hong Kong’s entrepreneurial transformation to take the financial services sector to the next level.

King Leung is the head of fintech at InvestHK. Before he joined the Hong Kong government, King was a serial entrepreneur, angel investor and university lecturer in Asia, the US and UK

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