InvestHK: 2018 will be the year that fintech goes mainstream in Hong Kong

What is InvestHK, what was the idea behind this initiative and why Hong Kong as location?

InvestHK is the department of the Hong Kong Government responsible for attracting and retaining foreign direct investment. Our vision is to strengthen Hong Kong’s status as the leading international business location in Asia. We work with overseas and Mainland entrepreneurs, SMEs and multinationals that wish to set up an office – or expand their existing business – in Hong Kong.

InvestHK has set up a dedicated fintech team in Hong Kong with fintech leads located in the US (San Francisco) and Europe (London), working alongside the likes of banking, payments remittances, insurance and software companies experimenting with new technologies like Blockchain and Artificial Intelligence.

We’ve built on Hong Kong’s long history of trade and alignment with the UK, signing a Fintech ‘bridge’ partnership with the UK in September 2017, to foster collaboration between these two major Fintech hubs. Our collaboration with the UK comes at a time of great opportunity for financial technology businesses to explore Hong Kong as their launch pad to expand. With the UK’s expected departure from the EU, expanding to Hong Kong in order to capture the ample Fintech opportunities in Asia and China has never been more important.

Therefore, the bridge is a comprehensive agreement covering government-to-government, regulator-to-regulator and industry-to-industry co-operation.

Why should Fintech startups want to expand to Hong Kong? What are the benefits of opening offices there?

There are countless reasons why startups should expand to Hong Kong.

Hong Kong is consistently ranked as one of the strongest startup hubs in the world. Accenture’s analysis of CB Insights data reveals that the top 10 Asia-based Fintech deals all happened in China and Hong Kong with an aggregate worth around USD 4 billion.

Hong Kong’s fintech industry is developing rapidly with strong support from the government, accelerators and other stakeholders in the private sector. In fact, PwC’s 2017 Hong Kong Fintech Report, found that 82% of Hong Kong banks and other financial institutions aim to enter into some form of partnership with a Fintech business in the next five years. The ecosystem is full of opportunities for Fintechs to meet with banks and other potential customers, eager to innovate their own business.

Its proximity and connectivity to Mainland China, one of the world’s most important fintech markets, also provides a unique advantage. For instance, the Securities and Futures Commission of Hong Kong now allows for customers in Guangdong province to open wealth management accounts completely electronically, without requiring in-person verification.

The majority of mainland Chinese fintech players such as Alipay, ZhongAn and Ping An to name but a few, use Hong Kong as the first stepping stone of their international expansion. This makes Hong Kong an attractive place for overseas fintechs that are intent on engaging with these Mainland companies.

Can you give some names of already established Fintech players that operate in Hong Kong and share with us what is their focus?

We’re seeing consistent growth in interest for fintech in Hong Kong. In 2016, when we first organised Hong Kong Fintech Week, we were blown away by the amount of support we received. In 2017 we saw a 40% rise in the number of delegates attending.

That figure is today reflected in the number of leading Fintech companies that we’re seeing locally. These include businesses like 8 Securities, Asia’s first no-commission stock trading app, Bitspark, a blockchain-powered remittance network, TNG Wallet, a P2P payments network and ANX International, a blockchain payments services provider, among many others.

Perhaps most telling of the ecosystem’s recent rise is the increase of leading UK companies that are opening in Hong Kong. These include global fintech names such as Revolut, Azimo and Nutmeg.

What is the role of the Central Bank of HK (as a regulator) in creating a Fintech ecosystem?

The Hong Kong Monetary Authority (HKMA) is playing an absolutely crucial role in strengthening the fintech ecosystem. Not only it is working closely with local innovators, but it’s also collaborating with international regulators, modernising and building on the global fintech ecosystem.

Hong Kong has a strong relationship with Mainland China, as the HKMA collaborates very closely with the Office of Financial Development Service of Shenzhen (OFDS). Together, they’ve launched a joint Fintech Award offering total prizes of about HDK 7 million, a Soft-landing Scheme encouraging Hong Kong fintech companies to expand their business to the Mainland, and vice versa, and a Talent Development Programme with companies like WeBank and Tencent, to offer summer intern positions for technology students.

Further afield, the HKMA and Monetary Authority of Singapore (MAS) recently signed a co-operation agreement on fintech, formalising collaboration on joint innovation projects, sharing of information and exchange of expertise, but most importantly setting in motion the creation of a blockchain-enabled, cross-border payments platform between the two institutions.

How has 2017 been for the Fintech industry as a whole and on a local level? What are your predictions for 2018?

2016 saw the APAC region eclipse Europe and America for the first time in terms of investments made into fintech companies with USD 8.6 billion being invested across 181 deals. In 2017, Asia continued to grow at a similar pace to Europe, solidifying its position as one of the world’s leading fintech regions.

Therefore, 2018 will be the year that fintech goes mainstream in Hong Kong. We’re now at a point where technological innovation has become a priority issue for the boardroom and executive committee of all banks. The payments space is getting more and more crowded and I expect fewer numbers of Paytech companies from overseas arriving in Hong Kong than in 2017. However, I expect some holders of the SVF licences to either begin using them or start using them more in 2018.

Insurtech companies from the UK and elsewhere in Europe are looking at Hong Kong and I expect more to come in 2018 because they recognise the business opportunity in the insurance sector, which is probably the least disrupted. The opportunity Insurtechs see in Hong Kong is in the area of renovating legacy systems and efficiency gains through automation of processing and handling insurance claims. This trend will continue and speed up in 2018.

Moreover, Blockchain companies are looking to establish a foothold in Hong Kong and the before mentioned ANX International is a good example of a company that has grown significantly in recent years.

About Thorsten Terweiden

Thorsten Terweiden is Deputy Head of Fintech and based at the London Office of Invest Hong Kong. In addition to being the Fintech lead for InvestHK in the UK and continental Europe, he is also responsible for Financial Services in the UK. Prior to joining Invest Hong Kong, Thorsten worked in both investment promotion and trade development for the German-British Chamber of Commerce and for the last six years as Head of Swiss Business Hub UK till the end of 2014.