China Markets

Embracing fintech

How Hong Kong is ramping up to be a global fintech capital

Digital innovation and fintech hold great promise for the economy and society. Hong Kong, as an established international financial center, is embracing the agenda and taking steps to transform itself into a hotbed of fintech innovation and a pioneer in digital finance and IT systems.

The right Elements

Hong Kong is a leading investment hub and home to one of the largest stock exchanges by market capitalization. The Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect platforms allow for cross-boundary investment between Hong Kong and Mainland China. Hong Kong is also the world’s largest offshore Renminbi (RMB) hub. Approximately 70 percent of the world’s RMB payment transactions are processed via Hong Kong.

With all this access to capital, it’s not surprising that Hong Kong has a thriving entrepreneurial scene. A 2017 survey found that there were 2,300 startups in Hong Kong.

The entrepreneurial scene is also supported by a large pool of quality talent, ready to make their mark on the world. In 2018, The Economist placed The University of Hong Kong’s MBA program number one in Asia for the ninth consecutive year and the Financial Times’ ranking found that two of the world’s top four EMBA programs are in Hong Kong.

Joining the students are talented professionals from around the world who are drawn to Hong Kong. Their energy, ambition and experience add to the mix of talent looking for opportunity.

Hong Kong has a thriving entrepreneurial scene. A 2017 survey found that there were 2,300 startups in Hong Kong.

The Right Support

One such initiative is Cyberport, the city’s flagship digital technology hub housing over 1,200 startups and technology companies.

The private sector and human capital of Hong Kong have a third partner in building the future economy. Forward-looking programs and initiatives by the Hong Kong government also bolster the city’s attractiveness as a launchpad for startups.

One such initiative is Cyberport, the city’s flagship digital technology hub housing over 1,200 startups and technology companies. It boasts more than 300 fintech start-ups and companies, making it a leading fintech cluster in Asia. As an incubator, Cyberport nurtures selected startups with initial seed funding and financial assistance. Those who make the cut can receive up to HK$20 million (US$2.5 million) Series A stage funding, which comes from a HK$200 million (US$25 million) Cyberport Macro Fund.

Besides providing seed funding, Cyberport hosts young startups in their modern campus, alongside established enterprises like Microsoft, Lenovo, and ZhongAn. Cyberport offers a community where the startups can learn from established digital technology companies.

However, some innovative business ventures need more than space and funding. They also need help navigating complicated regulatory environments — especially when it comes to fintech.

The Hong Kong Monetary Authority (HKMA), through its Fintech Facilitation Office established in 2016, has embraced fintech and created the Fintech Supervisory Sandbox (FSS). The FSS gives companies the chance to try out new fintech ideas in a limited scope without having to reach full regulatory compliance. Companies can learn from the trials and make necessary changes on a small scale with a lower development cost before they make their official launch in the marketplace.

To accelerate the advancement and digitalization of the financial system, the HKMA launched the Faster Payment System (FPS) in 2018. The FPS puts banks and stored value facilities (SVFs) on the same platform. Now anyone can instantly transfer funds anytime, anywhere, across different banks or SVFs with just a mobile number or email address of the payee.

“The Hong Kong Monetary Authority actively facilitates and promotes fintech development, notably through the seven initiatives for a New Era of Smart Banking. These include a 24/7 Faster Payment System, a Fintech Supervisory Sandbox, promotion of Open APIs by banks, and virtual banking. They have created a conducive ecosystem for fintech innovation and adoption in Hong Kong,” said Howard Lee, Deputy Chief Executive of the HKMA.

The Next Generation

One of the SVFs to benefit from the Faster Payment System was also incubated at Cyberport, the TNG FinTech Group (TNG). Founded in 2012, TNG offers digital financial services through the use of their e-wallets and other platforms.

Founder and CEO Alex Kong is optimistic. “Our goal [is] to develop world-class fintech infrastructure [that] aligns with the government’s drive to take our city into a new era of technology and innovation,” he said.

I trust the legal system. Hong Kong is an excellent place to do business.

– Alex Kong, Founder and CEO of TNG Fintech Group

Embracing fintech is essential in the digital era. As Hong Kong has shown, with the right partners, policies and support it can be a source of new jobs and growth for any economy.

This page was paid for by Brand Hong Kong. The editorial staff of CNBC had no role in the creation of this page.