Fintech is in the blood of Hong Kong people! Not only did people grow up knowing Hong Kong as the financial centre of Asia but they also use daily the most widely used contactless payment system in the world: The Octopus card. Yet even with these prerequisites Hong Kong needs to think about reinventing itself and its financial industry. Since the starts of 2015, Hong Kong had been going through a process of learning and adaption to understand how to best benefit from this new economic sector.
Whilst the reflection is still taking place Hong Kong has two narratives when it comes to fintech. Firstly, it should empower the seventy international banks that are located in Hong Kong, developing B2B solutions catering for the financial industry in the view of making them more competitive. The second strength of Hong Kong is that for decades business people there have been looking into China and the opportunities there.
Today this financial maturity and expertise that Hong Kong holds, combined with the market opportunity and dynamism that it has due to its geography, is creating a unique moment in time for the city to take the global lead as a fintech hub. Fintech growth is driven by an institutional necessity to adapt and collaborate in the face of competition coming from new startups. What’s more, the current financial market reform occurring in China will inevitably open opportunities for new fintech startups or as they should more accurately be called, internet finance companies.
On the last point, fintech in China is not a “fad” driven simply by the law of large numbers. Yes, there is over two thousand P2P lending platforms but we have a population of 1.2 billion people. In other words there is one platform per 600,000 people. Compare this to the UK, and you have one platform per 800,000 people. The proportion is not that far off but it is a perfect example of how China is benefiting from the size of its country skewing the size of the industry upwards.
The limit with this law of large numbers is that it does little to illustrate how truly innovative the country is. Innovation is instead found in the behaviour of people. People skip the cash economy and pay for their taxi fare, rent or even investment products directly using their mobile wallets. Innovation is also supercharged by governments with the new Internet Finance Guidelines released in July. Tsinghua University already had a fintech accelerator two years ago and it now has a co-working space in Hong Kong, the SuperCharger, that solely focuses on fintech companies entering the China market and vice versa.
Fintech in China is not only here to stay but governments will accommodate to create a harmonious regulatory environment to support a balanced growth, especially with the traditional players.
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Joanna Cheung
Managing Director of TusPark HK
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