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Competition for the future fintech hub lead

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Competition for the future fintech hub lead

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Competition for the future fintech hub lead

  1. 1. Comparing Asia’s Leading FinTech Hubs Hong Kong vs. Singapore
  2. 2. • Hong Kong and Singapore have established themselves as large financial centers with a natural interest in FinTech • To this day, Singapore has lead the race of becoming the main fintech hub for new start-ups • This competition is won by legislation, funding, networks, knowledge & talent and demand for the solutions • The above attributes have helped Singapore in branding itself better among FinTech companies than any other region in Asia Pacific • Hong Kong has lacked a welcoming atmosphere towards new FinTech start-ups since Hong Kong banks traditionally have not been open for disruptive ideas and newcomers • The political situation in Hong Kong has also affected the reputation of the finance hub • Some also fear that in the future, China could expand its (banking and FinTech) legislation to Hong Kong • At the moment, political, social, economical and technological variables point towards Singapore having better conditions in keeping its leading position as a FinTech hub in Asia in the future • On the other hand, Hong Kong has awakened to the competition and issued several investment initiatives towards improving the ecosystems and attracting new start-ups Summary 2
  3. 3. FinTech in Hong Kong and Singapore
  4. 4. FinTech industry has been booming in the past few years in Asia as new start-ups and unicorn companies have emerged in different countries. Overall, Asia has surpassed the US in FinTech investments, due to growth in China and Hong Kong. This foresight study looks at the two advanced economies, economic and finance hubs; Hong Kong and Singapore and the rivalry between them for the leading position in Asia. As China’s FinTech ecosystem is not as open as Singapore’s nor Hong Kong’s for foreign companies, it has been left aside from this comparison. Both Hong Kong and Singapore are searching for ways to lure and produce new successful companies to do business in their regions. This raises the question, which of these financial cities will win the race and become the leading hub for FinTech companies? The competition is fierce when countries in general compete to attract and support new companies to base their headquarters in their regions. Some elements that regions need to address in developing into winning hubs are for example favorable and permissive legislation, funding, clusters, knowledge, talent and the local demand. Within FinTech, PayTech will be the largest segment driven by mobile financial inclusion and growing tech-savvy middle-class. FinTech in Asia 4
  5. 5. What makes a FinTech hub 5 Source: Deloitte
  6. 6. Hong Kong is one of the leading financial cities in the world which automatically adds some value and hopes for it to succeed in the race of becoming also the leading FinTech hub. The supporting qualities where Hong Kong stands out: 1. Being a top 3 global financial hub 2. A large number of venture capitalists 3. New virtual bank legislation 4. Greater bay area and collaboration with China 5. Free and efficient finance regulatory 6. A large network in banking and law sectors Pros for Hong Kong 6 Major FinTech ecosystem support in Hong Kong: • Hong Kong FinTech week • Cyberport • Offering university degrees in FinTech such as the BASc(FinTech) in Hong Kong University
  7. 7. Like Hong Kong, Singapore has a reputation of being one of the leading business and financial centers albeit a less influential one than its rival. The benefit that Singapore holds are for example: 1. Being one of the leading technology hubs with an active government ready to invest recourses and favourable policies 2. Clear and supportive FinTech regulation. For example, Singapore established a “FinTech & Innovation Group and FinTech Office” in 2015 3. Large number of successful FinTech companies 4. Large number of venture capitalists 5. Singapore is seen and used as a gateway to Southeast Asia 6. The legislation towards FinTech is simpler compared to Hong Kong Pros for Singapore 7 FinTech ecosystem support in Singapore: • Singapore FinTech Festival • Government goal to be the first “smart nation” by 2030 • Monetary authority of Singapore is actively encouraging the growth of FinTech sector • Offering The MSc in FinTech in Nanyang Technological University
  8. 8. Why is Singapore considered to be leading the race?
  9. 9. FinTech hub rakings 9 Source: Deloitte
  10. 10. FinTech hub rakings Source: Reuters 10
  11. 11. A big advantage for Singapore is that trust to its institutions has remained unchanged. While Hong Kong - a semi-autonomous city with its current political and social turbulence - is struggling with eroding trust for its future. Some foreign companies and businesses have started to fear that China's national security legislation could be introduced to Hong Kong which would have influence the business confidence. In addition, even though Hong Kong advertises its supporting atmosphere to new FinTech companies, many start-up entrepreneurs consider the big banks being hostile towards newcomers. Cooperation with the big, established banks is incremental for FinTech companies while the banks appear protective fearing the new tech disruptions would eat their share of the cake. In addition, the Hong Kong government innovation and start-up funding system has been blamed for preferring investments and funding with small risks while small risk investment in the start-up world are challenging to find. In 2017, Singapore fintech fundraising was 983.6 million USD whereas the same figure in Hong Kong was 596.8 million USD. In 2019 Singapore made a new record raising 735 million USD in the first nine months. Why is Singapore considered to be leading the race? 11
  12. 12. Even though Hong Kong is at the moment lacking behind Singapore in FinTech space, it still holds a lot of potential and opportunities. Although Hong Kong has not yet witnessed any major disruptions in consumer banking or insurances, it has an enormous potential what comes to fund raising and investments. It is the world leading initial public offering (IPO) market and in 2019, 125 companies raised over 36 billion USD. In 2018, 70 percent of the Hong Kong residents had never made a mobile payment. With potential legislation changes, such as virtual baking, this can be an interesting future opportunity for new FinTech companies. Much of course is depending on the political development in Hong Kong. At the same time, the proximity to Mainland China could offer opportunities Shenzhen being next door, and Hong Kong actively promoting the Greater Bay Area cooperation. Hong Kong was named as the leading international financial centre of the Greater Bay Area in the blue print by the Central Government. It is worth noticing though, that after six months of the protests in the city, the Central Government has paid a lot of emphasis on Macau, also in the area of financial industries, as an alternative to Hong Kong. Where are Hong Kong’s future opportunities? 12
  13. 13. Future considerations
  14. 14. When considering future business opportunities within FinTech in Singapore or Hong Kong, companies should take into consideration the following: 1. Working environment with existing banks 2. Prepare for local, long term presence 3. The flexibility of the legislation – follow the regulatory changes having impact on the future opportunities 4. Sandbox environment and future plans 5. Hong Kong's future - giving the recent events and current political situation and how these factors are influencing the business confidence and trust in the future 6. Network and funding possibilities 7. Which region has been producing more successful companies in your area of FinTech business? 8. Which area can attract and offer more talented workers? 9. The visa policy, easiness of establishing company and doing business Future Considerations 14
  15. 15. • https://www.scmp.com/news/hong-kong/hong-kong-economy/article/2153788/hongkongers-still-not-convinced-smart-payment • https://www.accenture.com/_acnmedia/pdf-98/accenture-the-win-win-proposition-apac-fintech-momentum.pdf • https://newsroom.accenture.com/news/global-fintech-fundraising-fell-in-first-half-of-2019-with-decline-in-china-offsetting-gains-in-the-us-and-europe-accenture-analysis-finds.htm • https://www.entrepreneur.com/article/322660 • https://home.kpmg/xx/en/home/media/press-releases/2019/07/global-fintech-investment-subdued-in-h1-19-kpmg.html • https://www.forbes.com/sites/jemmagreen/2018/05/24/making-fintech-feel-at-home-the-race-to-land-the-new-industries/#727e34ab53a7 • https://nexchange.com/article/10049 • https://www.jbs.cam.ac.uk/fileadmin/user_upload/research/centres/alternative-finance/downloads/2018-ccaf-global-fintech-hub-report-eng.pdf’ • https://www2.deloitte.com/content/dam/Deloitte/lu/Documents/technology/lu-what-makes-successful-fintech-hub-global-fintech-race-112017.pdf • https://e27.co/will-hong-kong-top-singapore-fintech-innovations-year-20181010/ • http://www.chinadaily.com.cn/hkedition/2019-06/20/content_37482746.htm • https://www.reuters.com/article/us-asia-fintech/hong-kong-singapore-rivalry-hobbling-asia-in-100-billion-fintech-race-lobby-group-idUSKBN1900LN • https://knowledge.wharton.upenn.edu/article/fintech-china-lies-ahead/ • Interviews (interviewees didn’t want their names to be published) • https://www.scmp.com/business/companies/article/2135144/hong-kong-fintech-outlay-doubles-5-year-tally-well-ahead • https://www.chinadailyhk.com/articles/198/7/204/1560958058865.html • Deloitte: Finland as a FinTech Hub Pre-Study of the Finnish FinTech Landscape, the Supporting Ecosystem and Key Recommendations • https://spms.ntu.edu.sg/MathematicalSciences/MSc-Degrees/Pages/MSc-in-FinTech.aspx • https://www.fsdc.org.hk/sites/default/files/FSDC%20Paper_FinTech_E.pdf • https://www.cs.hku.hk/fintech-home • https://southeastasiaglobe.com/fintech-singapore/ References 15

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