Why the UK’s flourishing Fintech ecosystem is attracting Hong Kong companies
The UK tech sector has experienced rapid growth over recent years, expanding more than two-and-a-half times faster than the overall economy. With London ranked as the second most connected place for tech in the world, only behind Silicon Valley in the US, it is evident that both the private sector and government departments are supporting efforts to promote technology as a key strength.
Today, there are over 220,000 tech companies in the UK, of which more than 10,000 are early stage start-ups. The vibrancy of the nation’s start-up and scale-up landscape has attracted capital from around the world, making it in the top three countries for total capital invested in digital tech companies. British tech start-ups have received more capital than any other European country. In 2018, they attracted £6.3 billion (US$7.9 billion) in funding from investors.
In April 2015, the UK Economic Secretary announced that HM Treasury, alongside the Department for International Trade (DIT) and the Financial Conduct Authority (FCA), would establish ‘Fintech Bridges’ with priority global markets. By establishing co-operation agreements between government, regulators and private sectors, these agreements reduce the barriers to entry in a new jurisdiction and create trade and investment opportunities for companies.
Two years later, the Hong Kong ‘Bridge’ was signed by senior UK and Hong Kong government officials in London, witnessed by Hong Kong Chief Executive Carrie Lam and UK Chancellor of the Exchequer Philip Hammond. This was the fifth ‘Bridge’ established by the UK, following agreements with Singapore, South Korea, China and Australia.
The Hong Kong agreement is the most comprehensive to date, and has three core elements: regulatory co-operation agreements; frequent government dialogue on Fintech; and finally, trade and investment initiatives supported by an implementation plan.
This has led to closer collaboration between the UK and Hong Kong’s global financial centres and the new business opportunities that the Fintech Bridge creates. Opportunities include the UK’s Department of International Trade Fintech Awards which brings together leading Hong Kong Fintech talent, with opportunities to explore the UK’s world leading Fintech eco-system and to connect with potential clients, peers and investors, through a bespoke UK visit programme for the winner.
Paul McComb, Director General for Trade and Investment at the UK Department for International Trade in Hong Kong, said “global connections are key to success for the UK tech industry. Connectedness extends our market reach and drives innovation in a process that is inherently collaborative. The UK has a substantial and diverse pool of local and international talent in various subsectors of the tech industry. We are keen to bring in more global collaboration opportunities as we believe diversity can foster innovation.”
UK’s high capabilities in FinTech
As Europe’s undisputed tech hub, the UK is a great place to start and scale global tech businesses. It is largely attributable to the country’s unique combination of talent, location and language, alongside its business-friendly environment, unrivalled access to capital and world-leading universities. The rise of UK banking start-ups such as Atom Bank, Monzo, Starling Bank and Revolut has ignited innovation within the sector. These ‘challenger banks’ target the smartphone generation and have transformed the way consumers communicate with their banks – foregoing physical branches and engaging users through smartphone applications.
In response to the consumer behaviour change set in motion by the digital-first disruptors, the largest banks have closed over 1,700 branches in the UK alone in the last five years. The established banking industry has invested heavily in developing their own digital capabilities, with the mobile channel now overwhelmingly the de facto method of money management. As Hong Kong joins the virtual banking stage, Standard Chartered HK will hold one of the first virtual banking licenses with joint venture partners PCCW, HKT and Ctrip Finance.
Tech companies across the UK have been growing in stature over the last few years, especially in the Fintech sector. In fact, there are more Fintech professionals in London than Silicon Valley and New York. London’s Fintech sector, which is one of the largest in the world, employs around 61,000 people. In addition, Leeds produces over 10,000 new tech graduates per year and is one of the largest clusters of financial services talent in Europe. In the north, Edinburgh boasts a strong talent pool of deeply experienced technologists and talented academics which enables a thriving Fintech ecosystem. While in Northern Ireland, Belfast is the world’s number one destination for Fintech investments.
Innovate Finance UK is an independent membership association representing the UK’s Fintech community, driving a forward thinking, sustainable global financial services sector. They are also a part of The Global Fintech Hub Federation, an independent and inclusive network of emerging and established Fintech hubs. The UK’s Fintech sector is creating a growing international community that fosters innovation across the world’s financial services industry with access to the UK’s regional clusters and talent pools.
This talent pool of future Fintech specialists are nurtured through the world’s top universities, such as the London School of Economics Research Laboratory and the University of Cambridge’s Centre for Alternative Finance at Judge Business School. Saïd Business School at the University of Oxford launched the Oxford Fintech Programme via a digital open enrolment programme in collaboration with GetSmarter, a global leader in education technology. Fintech in itself has become its own specialist subject, with demand growing rapidly – in 2017 the University of Strathclyde in Scotland launched the UK’s first Masters of Science (MSc) in Financial Technology.
UK’s flourishing ecosystem lends itself to HK companies setting up in the UK
Recognising that the UK is at the forefront of the Fintech revolution, the US bank giant Citigroup selected London as the site of its latest innovation lab network. With its supportive and open business environment, there is a wealth of opportunities and advice open to business across all scales, from start-ups to established multinational companies, coupled with visa support. The Bank of England supports Fintech firms with their financial services offering through its Fintech Accelerator and provides information about market infrastructure and regulations. Along with the lowest corporation tax rate in the G20, the UK offers research and development incentives. The UK Minister of Immigration announced earlier this month the introduction of two new visa routes for skilled, innovative international business and entrepreneurs wanting to set up businesses in the UK. The Start-Up visa route will be open to those starting a business for the first time in the UK, while the Innovator visa route will be for more developed businesses.
Actelligent, a Hong Kong Fintech specialist, chose the UK as the hub for its research and development division after partnering with the artificial intelligence (AI) experts at one of its most cutting-edge universities.
The company works with a team from the University of Edinburgh to create a pioneering tech platform that will help investors cross borders by connecting them with overseas brokers and industry experts.
The first-of-its-kind platform, which launched in March 2019, creates an ‘ecosystem’ where corporates, brokers and industry experts can interact and share knowledge with investors looking for overseas investment opportunities.
CEO Charmaine Lo, who worked in investment banking for 12 years at financial institutions such as Norges Bank Investment Management, Morgan Stanley and Merrill Lynch before founding Actelligent, said, “the UK is one of the leading Fintech centres in the world, receiving US$3.3 billion of Fintech investment last year. Scotland is leading the way in AI and also has a huge capital base. This, combined with London’s reputation as a major financial hub, the UK’s low corporation tax and the global mindset of UK fund managers, makes it a great place for us to do business.”
More importantly, the UK government has been incredibly supportive in growing its tech industry by making it a core component of the country’s modern industrial strategy, and has continued to invest in innovative ideas, people and digital infrastructure. Trade departments in the UK offer a range of services to companies looking to invest in the country and support businesses seeking to set-up in the UK with their innovative solutions. In addition, Innovate UK and the Catapult accelerator networks are driving innovative designs and tech solutions globally.
Unrivalled support from the UK government
Actelligent has received support from the Department for International Trade (DIT) in the UK and Hong Kong as well as Scottish Development International (SDI) who have assisted the company in setting up its offices: one in London, tapping into the city’s influential financial sector, and one in Edinburgh as its new research and development centre. In addition to connecting Actelligent with the University of Edinburgh, DIT and SDI helped the company secure Regional Selective Assistance (RSA) grants – Scotland’s main national scheme for providing financial assistance to industry – worth £305,000 for creating 20 new Fintech jobs.
Lo added, “the support DIT gives to businesses is invaluable and unmatched anywhere else. As well as introducing us to key contacts, DIT also helped us establish the practical elements of our UK business. This included advising on the market and sector, setting up a corporate bank account, finding the right office space and UK accountant, support on sponsoring license applications and so on. We couldn’t have done it without the support of the DIT team in both Hong Kong and the UK.”
With the first three licenses for virtual banking in Hong Kong taken up, Fintech and innovation is rapidly on the rise. As the UK is open for collaboration and partnerships, innovation in the financial services continues to push boundaries.
If you are interested in starting up or expand your business in the UK, please contact DIT directly.
To find out more information about the UK’s FinTech capabilities, visit our website here.