Fatihah Ramzi, DigitalCFO Asia | 22 March 2022
Hong Kong is on the rise to becoming an international FinTech Hub, with a great number of financial institutions and FinTech companies striving to swiftly scale-up.
Hong Kong has a diversified, robust, and vibrant environment that makes it a wonderful international fintech hotspot. Despite its tiny size, it is one of the most profitable markets for fintech start-ups looking to scale quickly. Despite the global trend, the Hong Kong fintech business continues to expand, raise capital, and recruit during the COVID-19 epidemic.
As a result of the Covid-19 pandemic, startups have been compelled to go beyond technological transformation and creativity. For financial companies, the emergence of fintech is now more prominent than ever as the need to overcome the Covid-19 epidemic has called for newer innovation. Hong Kong has managed to increase its efforts and establish itself as an international fintech hub owing to its well-developed information and communication technologies.
Owing to its scaling fintech development, Hong Kong prides itself as a prominent fintech hub for four main reasons:
1. Supportive Regulatory Bodies
Hong Kong regulators have boosted the fintech sector in recent years by introducing some groundbreaking rules. The country has established a stable, world-class regulatory environment, complete with appealing sandboxes and initiatives to spearhead fintech growth in emerging fields. Hong Kong is one of the most open environments for fintech firms to operate and extend cross-border activities, with no trade restrictions or limits on capital inflows and outflows.
A low and simple tax system, as well as a multitude of substantial help from the government, financing, and subsidy schemes, have been a great benefit to start-ups. The FAST talent scheme, for example, provides salary subsidies in order to establish 1,000 fintech positions in the city. Hong Kong’s recent granting of virtual banking licences has set a favourable example for neighbouring nations such as Taiwan, prompting them to join the fintech bandwagon as well.
The widespread use of payment mechanisms such as the Faster Payments System and QR Code Payments has provided consumers with cash-free options. To build their banking companies, several fintech tactics are used, and it is safe to assume that this diversity is what makes the Hong Kong fintech sector so active.
2. Bountiful Government Assistance
In addition to progressive regulatory laws, Hong Kong’s government provides a variety of awards to assist startups in establishing, growing, and expanding. Hong Kong provides unrivaled chances for fintech innovation, including R&D support, preferential tax deductions, waived fees, and financial recruiting aid, as well as matching funds for growth, fundraising, and even international expansion.
The Hong Kong government has taken the lead in promoting fintech development by announcing a bold plan to set aside $500 million HK to strengthen the city’s competitiveness and promote its financial services industry, which includes fintech. The Hong Kong government has also set aside $10 million HK to create the Fintech Proof-of-Concept Subsidy Scheme, which will give “through-train” screening and funding to fintech startups. Fintech enterprises can tick the box of capital and move forward with their expansion thanks to the abundance of financial help available.
3. Extensive Talent Pool
Hong Kong, being one of the world’s top financial cities, has a large pool of fintech and professional expertise, including around 200,000 experienced accountants, bankers, and asset managers. It is one of the best locations in the world for start-ups to swiftly expand, with over 600 fintech companies and start-ups. It has nine unicorn firms with a market capitalization of over $1 billion, three of which are listed in the KPMG FinTech 100.
The Hong Kong government is also supportive and proactive when it comes to fintech, and it continues to place a strong emphasis on developing the industry’s skills. The Hong Kong Monetary Authority launched the Fintech Career Accelerator Scheme to recruit new talents to the fintech industry as well as professionals from outside Hong Kong, in order to grow the local fintech talent pool.
4. FinTech Is Highly Sought After
Hong Kong has one of the highest rates of consumer fintech engagement in the world, outperforming economies like as France, the United States, and Japan. It also has a significant level of B2B fintech adoption, with 66 percent of fintech firms concentrating on the B2B sector. With 51 percent of enterprises operating or planning to expand in the Greater Bay Area, the city also acts as a platform to mainland China, the world’s largest fintech consumer market.
In addition to the strong adoption rates, the Hong Kong Stock Exchange has been the world’s top IPO market int he last seven years and is becoming a more popular pick for Asia’s fintech firms, largely thanks to highly advantageous listing guidelines tailored for technology companies. According to InvestHK’s 2021 Annual Startup Survey, Hong Kong’s start-up scene is still thriving, with the number of start-ups expanding by 68.5 percent from 2017 to 3,755. This applies to a variety of industries, including financial technology.
The future of fintech is looking bright in Hong Kong. If the country continues to maximize its benefits with a better structuring of the regulatory framework and the strengthening of consumer data protection, Hong Kong can be a promising place for FinTech companies and pave its way to being a FinTech Hub in the Asia Pacific region.