Opinion | The future lies with fintech, and Hong Kong is at the center of it

King Leung, Head of Fintech, Invest Hong Kong

As the world's economic recovery begins in Asia, Hong Kong is leading the way as the destination for international fintech companies to scale-up and grow across the region. As Asia's fintech hub, Hong Kong has adapted quickly to the pandemic and now the future is bright.

Hong Kong's scale-up factor

Companies, regulators and the government alike are making the most of Hong Kong's unique position to scale up on the mainland, in the Greater Bay Area and Southeast Asia – the largest, most dynamic fintech markets in the world. The city is a gateway for Chinese companies to launch internationally, as it is for companies seeking to reach China's 1.4 billion people, Southeast Asia and beyond. Considering the uncertainty faced by most economies, this enormous upside presents a once-in-a-generation opportunity.

Hong Kong has, for many years, been the launch pad for fintech companies seeking to innovate and scale up across Asia. But now more than ever, this is a geographical advantage that is ready-made for the post-pandemic era as scale becomes one of the most important success factors for fintech companies.

This puts Hong Kong at the start of a long-term transformation in how people across Asia access their money, and this is likely to be a driving force of positive economic change for the region's one-billion-plus unbanked population.

We are at the beginning of a long recovery process, but businesses are confident they will emerge with the ability to scale up, and will access strong talent, capital, infrastructure, and government support they need to remain relevant and competitive in the future.

Hong Kong's smart banking system and high penetration of fintech

Hong Kong is one of the first places for consumer fintech adoption in the world. It arrived as what was perhaps the earliest stage possible, with one of the world's first smart contactless payment systems, the Octopus card. Yet the sophistication of the city's smart banking system and high penetration of fintech often escapes the notice of the average critic.

Effective delivery of financial resources to massive populations through electronic channels has become paramount. Hong Kong has already been taking steps to boost competition across mainstream applications, by leading Asia through a revolution in virtual banking. Since the outbreak, consumers, banks and insurers have been implementing new digital payment transactions. Mobile services like HSBC's PayMe and Faster Payment System championed by the Hong Kong Monetary Authority (HKMA) are just a few examples of broad-based adoption that have been making an impact.

This innovation applies to all areas of financial services. A study by the Hong Kong Monetary Authority released last year found that 86 per cent of incumbent banks are progressively integrating fintech applications across all types of financial services, and all incumbent banks intend to introduce one or more fintech applications to their business in the next five years.

Government acted quickly to support fintech

The latest Hong Kong government's support for fintech focuses on fast delivery. The Fintech Proof-of-Concept Subsidy Scheme was announced this January to encourage collaboration between fintech companies and financial institutions. Most recently announced in the Hong Kong 2021/2022 budget announcements, the Hong Kong Monetary Authority is considering enhancing its Fintech Supervisory Sandbox by providing "through-train" vetting and funding arrangements for promising fintech solutions to reduce the time to market innovative financial products.

Looking ahead to opportunities in the post-pandemic world

Fintech companies in Asia are in the right place, at the right time. Despite the headwinds, in 2020, Hong Kong, Mainland China and Asia's emerging economies are the outliers in the International Monetary Fund's largely negative growth forecast for the next two years.

In the post-pandemic world, with a world-class regulatory regime and a strong capital market, this is the year fintech will supercharge Hong Kong's entrepreneurial transformation to take the financial services sector to the next level.

The views do not necessarily reflect those of DotDotNews.