Banks should work with fintech firms operating in Hong Kong
Recent announcements by the Hong Kong and Australian governments in relation to becoming leading financial technology (fintech) hubs in the region must be acknowledged.
Forming steering committees to deliver blueprints to support the industry is on the face of it a step forward. However, fintech is already an established, active, and fast growing industry serving customers across the globe. If regional governments want to position themselves at the forefront of this growth they must start by working with commercial banks to provide practical support.
Banks are keeping an eagle eye on disruptive fintech start-ups, this seems purely as a public-relations exercise. Ask any licensed cross-border remittance enterprise whether they can open a Hong Kong corporate bank account. Notwithstanding adhering to industry best practice (know your client, anti-money laundering) and compliance standards the answer will mostly be the same. Apart from a few regional banks which are prepared to support fintech operations, most suggest they don’t provide corporate accounts for money service businesses. More opaque answers range from “ Our risk systems cannot accommodate your business model” to “We don’t have enough resources to take on your type of business activity”.
Fintech by its nature takes the middleman out of traditional banking services such as savings and loans, insurance products, payments and foreign currency transactions, and does this with a lower cost base, robust compliance, leading edge technology, and aggressive marketing campaigns through social media channels. Fintech enterprises are creating significant reach by delivering these services through easy- to-access mobile and web-based platforms. The fintech industry has evolved targeting the hundreds of millions of people who are not independently wealthy, may be based in emerging markets, and are a long way from big cities, or running small and medium-sized enterprises.
Given the rapid growth forecasts and client acquisition numbers of fintech businesses, and huge valuations of some of the more successful enterprises it is clear fintech is here to stay and will continue revolutionising the delivery of customer products and services. Local banks in each country must start facilitating relationships with fintechs. It is in banks’ long-term interest to do this, as greater transparency for customers, and innovative technology and processes lead to more cost-effective and efficient delivery of services. Customer trust in banks will increase, presenting these banks with opportunities .
Governments, regulators and banks must come together to undergo a mindset change, so they can truly support fintech.
Jamie Spence, Tai Hang