Wednesday, April 1, 2020

Hong Kong’s FinTech Ecosystem: Almost 3 years in the making, but what’s next?

Hong Kong FinTech development is almost three years in the making. When Accenture announced its local version of their Innovation Lab (their Application is currently open for the 3rd batch) back in July 2014, what FinTech meant to the public and banks was still unclear. Fast-forward to today and Hong Kong is host to three FinTech Accelerators, the latest of which was recently featured here in Jumpstart Magazine.

This increased activity reflects a combination of private sector developments as well as public sector support. Indeed, Invest HK has been looking for a dedicated FinTech team with new staff covering Asia, Europe, and North-America. The Financial Services Treasury Bureau (FSTB) has published its FinTech report, one year after the creation of its committee.  Regulators have established their FinTech Contact point, such as the Securities & Futures Commission (SFC). Academia is also preparing the next generations of graduates to hold the right skill sets, The University of Hong Kong has FinTech courses at an MBA, Certificate level and one of its academic public (co-authored with the University of New South Wales) entitled The Evolution of FinTech, has recently been picked up by the New York Times. Finally, Hong Kong will be hosting its next large-scale FinTech conference on the 30th of May.

The above reflects the fact that Hong Kong is naturally a FinTech hub given its combination of human and financial capital it derives from being Asia’s first financial center. However, there is another element that fuels Hong Kong’s growth. As the FinTech ecosystem matures and information becomes increasingly shared across hubs, the center of gravity of FinTech activity is gradually but surely moving East. The recent Accenture survey exemplifies this with a four-fold increase in investment last year reaching US$3.5 billion. Regionally governments are also stepping up their game; the Monetary Authority of Singapore (MAS) is holding a week-long FinTech Festival, and the Australian government has issued its own policy report on FinTech.

The latter is perhaps the most important and interesting read that the region has seen. First of all, the focus is on data. Whilst the definitional problem around FinTech still exists, it seems that there is room to develop a new paradigm in our understanding by talking about TechFin instead. This is not a play on words because, if understood correctly, it fundamentally changes how we expect the future of finance to look and who will be at its core. In that respect, the CEO of DBS recently made it clear that his competition is Alibaba rather than another traditional bank.

This has deep consequences both in terms of human capital and regulation. If we accept that banks are FinTechs (in that they are financial services firm using technology) and that Alibaba is a TechFin (e.g. online e-commerce platform doing financial services) the question is not that the end product they do is the same (e.g. a loan), but how do they create, handle, originate and maintain the product as well as what the experience is for the user. We are moving from a “Know-your-Customer” mindset to a “Know-Your-Data” era. Bank’s wealth is their balance sheet whilst for tech firms it’s their data and IP to extract value from. Data privacy becomes a bigger stake than deposit insurance scheme and this is crucial in a context where the millennial generation is data rich but cash poor.

Hong Kong is going up this learning curve as we speak whilst other jurisdictions like China or India have already leapfrogged the future way of doing finance. Venture capital money, which is so often quoted in headlines of news stories, has created a success story in part, but mainly contributed to turning the entrepreneurial world into a massive Research & Development center led by startups. Founders have explored and evaluated what works or doesn’t, and now they benefit from a solid foundation (e.g. public awareness, staff training, investor sharpness) on which they can build and grow their (next) ventures.

We are at the start of a 20-year cycle in FinTech and we would be fools to say we truly know where this is going. Indeed, Amara’s law says that we tend to overestimate the effect of a technology in the short run, and underestimate the effect in the long run.

Let’s conceptualize this trend instead of focusing on the ability of a product to scale to market. This will provide a better capacity to understand where we are heading instead of being regularly disrupted by the velocity of news and innovation.

by Janos Barberis, founder of

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