Hong Kong sharpens fintech focus as a collaborative centre

Analysts are confident the city has an important role as a hub for the region

PUBLISHED : Saturday, 28 October, 2017, 10:00am
UPDATED : Saturday, 28 October, 2017, 10:00am

If you ask Charles d’Haussy, head of fintech at InvestHK, the combination of mainland firms listing in the city and large financial institutions striking deals with start-ups is a sign of things to come: the city will remain a financial hub, but this time with technology at its core.

“Hong Kong’s history has always been as gateway for trade,” said d’Haussy on the sidelines of the Hong Kong Fintech Week. “It will be the same going forward: it is going to be the place where mainland fintech companies come to sell their platforms to the world.”

He said the city should continue to use the role as a gateway between the mainland and the rest of the world to differentiate itself from flourishing regional competitors including Singapore and Shenzhen.

“The capital markets are here, as are the world’s big banks.”

Finding the city’s fintech groove has been a slow road for a territory that sits near the top of global competitiveness rankings, but lags behind when it comes to innovation in financial technology.

But the growth of mainland fintech players looking to use the city to expand beyond China is starting to change how Hong Kong is viewed.

Take ZhongAn Online Property & Casualty Insurance, China’s first online-only insurer, which recently listed in the city and has since become Hong Kong’s biggest listed fintech company. Analysts say the move will pave the way for further mainland players to list here thanks to the positive reception from investors, which saw ZhongAn raise US$1.5 billion.

But it is not just in IPOs where the city is making progress.

HKMA to cooperate with Shenzhen, Singapore on fintech development

Unlike regional competitor Singapore, which has positioned itself as a disrupter, Hong Kong has opted to avoid being seen as a fintech “generalist” and opted as a collaborative centre where large financial institutions and start-ups can do deals, according to a report from the Hong Kong Financial Services Development Council.

Industry watchers say the approach is paying off. “The real opportunity is for up and coming players to use the location as a base,” said Henri Arslanian, fintech and regtech leader for PwC in China and Hong Kong.

“In the B2B [business to business] fintech and regtech, there’s a lot of appetite in Asia,” he said. “I think this is a great opportunity for foreign fintechs to use Hong Kong as a stepping stone to enter the broader Asian market.”

Dianrong, one of China’s largest peer-to-peer lending platforms, recently joined forces with a Hong Kong-based firm, FinEX Asia, to launch an asset management platform, using the city’s status as financial hub to connect institutional investors with US consumer lending assets. Others are expected to follow suit, according to those who attended the Hong Kong Fintech Week.

Even Hong Kong’s strong regulator, Securities and Futures Commission, once considered an impediment to the start-up scene, is starting to reap benefits by providing more certainty for the fast-growing world of cryptocurrencies after authorities in Beijing recently clamped down on exchanges in the mainland.

“In the broader blockchain space I really believe the city has a strong future,” said Arslanian from PwC. “In that sense, the clear regulatory environment is a benefit.”