Let’s copy Singapore, or at least the best part of its approach to fintech

The Lion city has proven that its regulatory approach to fintech is a major drawing card

PUBLISHED : Monday, 24 July, 2017, 12:46pm
UPDATED : Monday, 24 July, 2017, 3:37pm

Hong Kong should take a closer look at Singapore and the success it has had in attracting peer-to-peer lender Lufax.

Unlike Hong Kong’s multi-layered regulatory structure, Singapore has set up its fintech regulatory oversight in a much simpler approach, such that the Monetary Authority of Singapore is the sole government body to vet operating applications from platforms such as Lufax.

Companies tend to avoid the red tape that comes with navigating multiple government departments, which helps explain why Singapore was so attractive to Lufax, even though Hong Kong was a far more natural fit in terms of geography.

Ping An, the parent company of Lufax, is based in Shenzhen, only an hour away by car from the heart of Hong Kong, or little as 20 minutes when the new high-speed rail system opens next year.

Yet, in spite of these geographic advantages, Ping An opted for Singapore, even though it is a three-hour flight away.

Lufax executives have indicated that Singapore was chosen in part because of its streamlined regulation on fintech, whereas Hong Kong would require working with multiple regulators.

Imagine if Lufax were to set up in Hong Kong. Firstly, it would need to go through the Hong Kong Monetary Authority which regulates banking and lending. It would then need to submit for a license to the Securities and Futures Commission, which regulates the sale of any fund or investment products.

And if Lufax wanted to sell insurance or pension products on its platforms, it may need to apply for further approvals from the newly set up Insurance Authority as well as the Mandatory Provident Fund Schemes Authority.

It is not necessary for Hong Kong to combined all our regulators into a single oversight body for fintech. However, thought should be given to developing a single license application window to make it easier.

Overseas fintech companies are likely to focus on the licensing process as the key consideration in making decisions about where to set up, as both Hong Kong and Singapore are in the same time zone, which means there’s little to differentiate the cities from the operational perspective of New York or London.

Unfortunately, unless we can reform our regulatory system quickly, we are likely to see more companies follow in the footsteps of Lufax in opting for Singapore.