Hong Kong enters race to become a FinTech hub: Page 2 of 3
The banking and financial services institutions are potential beneficiaries of these transformative tools but current regulatory frameworks have limited the possibilities. So much so that banks have seen non-traditional competitors rise to the occasion using Fintech as a platform for engaging consumers and business in areas such as crowdfunding, peer-to-peer lending, algorithmic asset management, thematic investing and payments to name a few.
Wharton Fintech defines Fintech as an economic industry comprising of companies that use technology to make financial systems more efficient. According to Accenture’s “The Rise of Fintech: New York’s Opportunity for Tech Leadership” global investments in financial services technologies (Fintech) will rise to US$8 billion by 2018 citing open source software and cloud technology has lowering the barriers to entry for startups and enabling the proliferation of Fintech ventures. Accenture asserts that financial institutions must exploit the growth opportunities presented by digital and do so from outside the organization or lose out to smaller, independent firms.
The race to build Fintech hubs outside of Silicon Valley has seen New York and London rise to the challenge. Fintech companies are drawn to where big clients are and as such setting up Fintech clusters near financial centers is a natural direction for many. In Q4 2014, the New South Wales government has publicly declared to build Sydney into a Fintech hub for the country. A Macquarie Research report, “Australian Banks: 'Trust' in the IT Arms Race” estimates that banks stand to lose 25-30 percent of current revenue from non-traditional players.
Asia, already becoming a global economic power, is now playing catchup. In February 2015, the Hong Kong Government has voiced its ambition to make the city a regional Fintech hub.
According to Irene Chu, Partner and Head of High Growth Technology & Innovation Group at KPMG, Hong Kong is a key financial center for Asia and the world. Becoming a Fintech hub is a natural fit. “Hong Kong has ready access to talent and experience in financial services sector but we’ve also seen an increase in the number of co-working spaces, incubators and accelerators programs supporting start-ups.”
Hong Kong is not without its fair share of innovation centers. Chu cites the efforts by the Innovation and Technology Commission and the existence of Cyberport and Science Parks. However, she believes the challenge for Hong Kong is how to focus the effort on the financial services sectors.
“While Hong Kong has a supportive ecosystem, the steering committee responsible for analyzing Hong Kong’s position as a Fintech hub needs to find the gap and figure out a way to coordinate effort within the different parts of the ecosystem so you have a more efficient process for technology that can be adopted,” adds Chu.