Financial technology has a bright future in Hong Kong
Updated: 2016-02-16 09:53
By Bill Condon(HK Edition)
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We have left behind the coldest, wettest January on record and enthusiastically embraced the Year of the Monkey. But the short-term economic forecast is looking pretty bleak.
The slowdown on the mainland has been blamed for many global economic woes and this also affects Hong Kong. In reality the process of adjustment from one stage of economic development to the next was always likely to encounter growing pains. But GDP forecasts of just under 7 percent should be viewed a little more optimistically, particularly when considered against the phenomenal growth of the mainland economy over recent years.
Around the region turbulent relationships, increased anxieties on the Korean Peninsula plus a slowing down in many other economies also suggest the immediate future is not looking too bright.
Against this gloomy backdrop political rhetoric in Hong Kong is suggesting that salvation for the territory is coming in the form of President Xi Jinping's vision for future regional development and economic inclusion. The ambitious Belt and Road project comprises a system of regional and maritime economic corridors which will truly affect development on a scale difficult to imagine and certainly alter the global geopolitical landscape.
Local attempts to position Hong Kong as some sort of super-connector and a major beneficiary seem a little far-fetched. Having said that, Hong Kong is certainly as well placed as any other developed economies in the region to benefit from Xi's vision through increased demand for a host of services which will be required as the project gathers momentum.
Thankfully, however, another ray of hope lies on the horizon.
The financial technology, or FinTech, sector in Hong Kong is coming of age. The provision of radical or disruptive innovation, alongside the development of applications, processes, products or business models that will redefine the financial services industry, has taken root and is thriving at the moment.
The emergence of the FinTech sector began locally around two years ago. It started as a grassroots movement for innovation, built and led by entrepreneurs and the ecosystem that has spawned the environment that we see today. This ecosystem has developed rapidly and the industry is getting traction. FinTech is no longer a "buzz word" - it is becoming an effective movement for change within the financial services culture and Hong Kong is rapidly becoming an important hub. As a result we are attracting considerable interest and drawing new talent into the territory.
At the moment there are more than 60 FinTech startups at various stages of development in Hong Kong and exciting, new market entrants are choosing to set up operations here every month.
The city recently hosted the largest FinTech event ever held in Asia. The StartmeupHK Festival comprised C-suite participants covering the entire financial services ecosystem from banks, credit card companies, insurers and regulators, through government and startups.
The festival was driven by key influencers and entrepreneurs and generously supported by InvestHK. Industry heavyweights connected with those shaping the future of FinTech through a series of vertically designed and enthusiastically received events. Center stage towered the brilliant and visionary Elon Musk, aptly surrounded and supported by traditionalists, next-generation visionaries, movers, shapers and disrupters.
So why Hong Kong? The city has long been regarded as the leading financial services center in Asia and one of the leading financial services centers globally. Over 70 of the top 100 banks are located here. Proximity to major financial institutions and the mainland's financial services innovators led by companies like Alibaba, Tencent and Baidu is a major advantage. A robust regulatory and legal framework exists which is supported by the physical infrastructure needed. This in turn enables and encourages architects of disruptive technologies to evolve. Strong government support and improving access to the talent pool are also important ingredients.
Within the global financial services sector a collaborative model of innovation has emerged. Financial institutions have become more willing to incubate, nurture and fund FinTech startups. This willingness is driven by the need to partner with external and nimble innovators, in part to overcome capital constraints, new regulations and legacy issues. One recent exemplar of the financial sector's drive to work more closely with the tech community is Commonwealth Bank of Australia, which recently launched its innovation lab in Hong Kong. This was a positive indictment of the SAR's growing stature in the sector.
We should not lose sight of the other aspects that enable and support the ecosystem required to support Hong Kong's aspirations to become an important FinTech hub. The territory has always had a very outward-looking, internationally minded population, supported by persistent and passionate entrepreneurs with global connectivity and the ability to move quickly - a powerful combination!
(HK Edition 02/16/2016 page10)