By Edmon Chung | Hong Kong's free port and laissez-faire governance approach is a textbook success for economic development. Hong Kong’s Octopus card, integrated with the MTR metro system, is a textbook success in e-commerce innovation. Octopus’ stranglehold on Hong Kong’s digital payment system is fast becoming a textbook case of the pitfalls of a natural monopoly. That need not be so.
The story is about mobility. When it comes to FinTech in Asia, with the shining success of the Octopus, Hong Kong has long prided itself as one of the pioneers in e-payment. Octopus sparked the adoption of contactless payment systems around the world, and to this day remains an indispensable part of the “Hong Kong experience” for locals and tourists alike.
Ironically, that revolutionary robustness and efficiency inadvertently hurt subsequent innovations. The Octopus system has barely changed, and today, it has become a dominant and immobile force threatening to suffocate FinTech innovations.
In the recently launched Youth Mobility Index (YMI.Asia), Hong Kong ranked #1 in Startup Momentum and Entrepreneurship Mobility, but lost out in the overall YMI rankings to rival Singapore. The YMI 2018 findings reconcile well with Hong Kong’s favorable legal and financial conditions to be a strong hub for FinTech entrepreneurs.
However, several aspects loom as potential problems, the sustainability of information freedom and its impact on social tolerance and openness will have lasting impact on the attractiveness of Hong Kong as a FinTech and entrepreneurship hub in general.
As far as FinTech entrepreneurs are concerned, there have been broad strokes from the highest levels of government policy to boost FinTech with low-rent working space and other well-meaning resources. At the consumer level, Hong Kong’s economy presents a rich and malleable sandbox.
Originally enabled by its high population density and now by high-rolling tourism, Hong Kong features a vibrant retail space, even though sky-high rents have made it hard for SMEs to keep up. This is reflected in the YMI.Asia Cost-Happiness efficiency score, where Hong Kong fell miserably to the bottom spot.
The story remains about mobility. Octopus’ success was built on the mobility it supported. To transform this world-leading platform in today’s Internet-driven world would require Octopus to take the bold move of opening up its platform to let in constructive FinTech competition. Imagine a blockchain-driven Octopus platform that allows multiple providers to offer MTR compatible contactless payment throughout the retail payment system.
Of course there are many other technical possibilities, but the key point – taking a page from Hong Kong’s success as a free port – is that an open platform is Hong Kong’s time-honored advantage. Just as forging open the then-Hong Kong Telecom’s data network for ISPs to blossom ushered in the most speedy and cost-effective Internet connectivity in Asia (Hong Kong is #1 in Internet Speed-Cost Performance, according to the YMI 2018 rankings).
The classical laissez-faire approach facilitates capital mobility. A neo-laissez-faire approach that sees the visible hand supporting the invisible hand becomes increasingly important not to regulate innovation, but to remove market barriers by ensuring an open marketplace that unleashes mobility for upstarts.
This echoes resoundingly with a key finding from the YMI study that Youth Mobility is the new competitive advantage of cities and nations. Young people increasingly seek life experiences through mobility rather than the amassment of properties as a symbol of status.
Hong Kong stands on the precipice of becoming a regional hub for FinTech, backed by government policies and aligned with plentiful public and private investment. Hong Kong’s might as an Asian financial hub is an obvious opportunity where the most lucrative utilisation of FinTech lies.
FinTech is poised to instigate a paradigm shift in the financial world. For Hong Kong to maintain its position as a world premiere financial centre, FinTech must be a centrepiece in policy consideration. Protection and subsidy is not the Hong Kong way. Forging open our prized Octopus platform to innovation and constructive competition will undoubtedly catapult Hong Kong to the forefront of FinTech world, by jumpstarting a wave of FinTech startups to thrive in Hong Kong.
About The Author
Edmon Chung is the CEO of DotAsia Organisation, heads the secretariat for Asia Pacific Regional Internet Governance Forum (APrIGF) and participates extensively in Internet governance, especially supporting youth participation. Edmon is an inventor of patents for internationalized domain names and email addresses, won the Most Innovative Award in the CCEA in 2001 and was selected by The Globe and Mail newspaper in 2000 as one of the Young Canadian Leaders.