Hong Kong's Future-Proofed Finance

Hong Kong's one-of-a-kind history and track record in leading global trade has helped it turn economic versatility into a business of its own. Here's how two companies are propelling fintech into the future as Hong Kong readies for its next evolution.

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Hong Kong's Future-Proofed Finance

Strong fundamentals and a thriving fintech ecosystem light the way to a bright outlook for the Asian banking hub.

With roots dating back to 1865, HSBC is synonymous with Hong Kong's success story as a financial hub. Founded by Thomas Sutherland, a Scotsman, the bank was established to support local and foreign trade in Hong Kong.

Hong Kong and HSBC are intrinsically linked,” says Luanne Lim, chief executive officer at HSBC Hong Kong. “The bank is part of the very fabric of the city. The advantages Hong Kong possesses in providing a connection to mainland China and a conduit between East and West are as important today as they were nearly 160 years ago.”

Now one of the world's largest financial services organizations, HSBC serves around 40 million personal, wealth and corporate customers worldwide in 63 countries and territories. The institution's evolution into an outward-facing global giant has been smoothed and anchored by Hong Kong's unique advantages and financial fundamentals.

“It offers a great financial environment,” adds Lim.

Hong Kong's success as a global banking center has been built on the founding principle of HSBC: its ability to provide a financial bridge between Asia and the rest of the world.

Hong Kong's strategic economic and geographical position between West and East Asia has persisted despite dramatic changes in the global economic system. It remains an important symbolic and practical barometer of financial globalization between East and West.

To ensure its relevance as an elite hub for finance, Hong Kong is perfecting another balancing act. By combining age-old tenets of prudent fiscal stewardship with cutting-edge technologies and sustainable policies that look set to shape the sector's future, the city is showing how it can continue to thrive.

These days, financial institutions are tapping into Hong Kong's unique advantages to sustain growth and development. They are also utilizing the innovation and technology shaping the future of finance to ensure business longevity and serve customers' evolving needs.

Hong Kong's location makes it ideal for business and international trade; there is a friendly taxation system, free movement of capital, strong and established capital markets, a respected judicial system and very effective financial supervision.

An institution that exemplifies this shift is ZA Bank. Hong Kong's first digital-only bank has established itself as one of Hong Kong's fintech pioneers, since setting up in early 2020. Offering 24/7 customer care, a full suite of virtual retail banking services, and an expanding range of products that include insurance and wealth management, the bank hit 600,000 users by the first half of 2022.

The bank's immediate impact on Hong Kong customers is a ringing endorsement of ZA Bank founder and chief executive officer Rockson Hsu's vision of marrying banking fundamentals to tech, with a compelling appeal to an already digitally savvy community.

By automating processes such as account opening and loan applications, virtual banks like ZA Bank offer users convenient banking services without the need to physically visit a bank branch — an appealing factor, particularly during the pandemic. Efficient operating models and lower operating costs also mean virtual banks can offer more benefits to customers, for example, savings products with attractive interest rates and waiving maintenance charges or minimum savings balance requirements. These enable virtual banks to promote financial inclusion.

Fostering inclusion by enabling the expansion of banking services to people with different financial needs was a strong initial driver for ZA Bank. Hsu says that Hong Kong's potential as an international fintech hub makes it a natural choice for digital banks.

“The development of virtual banks is building a culture of innovation in Hong Kong ,which will lead to industry transformation,” he says.

Hong Kong's fintech revolution is just getting started. ZA Bank is one of several virtual banks harnessing the potential of tech. Venerable banks such as HSBC and other major Hong Kong financial institutions are also sharpening their digital strategies as an urgent priority. Digital transformation is happening at lightning pace. But players like Hsu emphasize how Hong Kong's hard-earned reputation for prudence and effective financial regulation will underpin this shift.

"There's a perception that digital banking is faster but looser," he says. "But we are the opposite of that. In Hong Kong, digital banks are regulated just like traditional banks. So, although the entry barrier is perhaps higher than in other financial hubs, there's more trust.”

With the government maintaining a steady hand on the tiller, Hong Kong's financial sector is well placed to meet known as well as unforeseeable challenges.

Hong Kong is steadfast in its commitment to remain an international financial center. The skill sets of the population are the key to maintain that position.

These include delivering unified customer experiences, prioritizing digital transformation, implementing environmental, social, and governance initiatives (ESG), and developing talent to meet the evolving needs of the industry.

Pillars of HSBC's current strategic plan include an emphasis on green finance with a commitment to net-zero carbon emissions in its operations and supply chain by 2030. It also aims to become a market leader in wealth management and digitize at scale to deliver faster, easier digital customer experiences. Leveraging Hong Kong's unique advantages and its pool of local and international talents will be key to achieving these goals.

"We need to get two things right: technology and talent. HSBC has a strong record of investing in Hong Kong and its people through training," adds Lim. We want to develop future-ready skills and inspire a dynamic culture where the best want to work. By doing so, we can ensure that Hong Kong continues to thrive as a financial center and as a window to the world in East Asia.”

In 2021, the Hong Kong Monetary Authority (HKMA) unveiled “Fintech 2025”, its new strategy for driving the fintech development of Hong Kong. In it, the city's de facto central bank outlined a set of priorities designed to facilitate growth and enhance the digital transformation of the financial industry. Hsu believes that a strong support to fintech bodes well for Hong Kong's future as a banking hub.

“Digital banks are leading the trend,” he says. “It's a journey that will benefit end users and the market itself.”

Brand Hong Kong

With its unparalleled appetite for entrepreneurialism, Hong Kong's business climate continues to thrive, priming this world city for a bright future.

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