Hong Kong’s State of Fintech

Fintech in Hong Kong is rife due to its appeal in the start-up sphere, boasting over 800 fintech companies and 3,900 start-ups. Its appeal to the world comes from its commitment to a strong business environment, local and regional markets and strong technical infrastructure to support innovation and business, at a global scale. Hong Kong has consistently ranked among the top 10 in the Global Financial Centres Index’s world financial centre list, for the past decade. These statistics come despite its historically slow fintech uptake, but has since become a financial hub for the world and now hosts some of the leading platforms for finance, such as virtual currency platforms or stored value facilities. 

Many people think of fintech as financial technology, but Jack Ma once said it’s actually technology finance. What he meant by that is fintech doesn’t mean you’re doing technology stuff in a financial company. It is actually about how we can use technology to impact and disrupt the financial system. Therefore, we’re building and creating something that never existed before.

William Ip, Head of APAC Unlimit

What is the state of fintech in Hong Kong? 

Fintech in Hong Kong dates back to 1997, when they made an early start with the launch of Octopus card. And now, whilst the region is still in a state of growing momentum, we see that 74% of Hong Kong respondents are using at least two fintech services, and over 90% are adopting digital payments in 2023. Fintech has already established its roots in areas of Asia, such as China and Malaysia, but now Hong Kong is racing ahead as it boasts its strength of the international financial centre which has linked the Mainland and the rest of the world. This connection brings greater access to the country and financial opportunities for companies, the economy and international relationships with other countries. Since its boosted influence from fintechs, Hong Kong has been deemed a diverse, lucrative and dynamic landscape – driving its appeal with start-ups and businesses ready to launch to greater heights. 

In recent years, the focus has been to transform the financial sector with digital influence from fintechs, to further support Hong Kong’s strong and influential financial sector. Hong Kong is faced with competition from surrounding regions such as Shenzhen, Shanghai, Singapore, Sydney, Seoul and Mainland China, however the advantages of its location and digital acceptance among consumers makes it a target for financial operations due to its natural catchment area. In more recent years the arrival of fintechs, e-commerce companies and IT companies have been in larger numbers; influencing focus on areas of fintech such as cybersecurity, big data, analytics, blockchain and RegTech. The shift comes after the removal of significant barriers which limited Hong Kong’s economy and financial system; including financial regulations, technology capabilities and demand for innovation. 

Consequently, the presence of financial technology has surged in Hong Kong, with the use of online payments for retail sales in the city alone reaching HK$34.6 billion in 2022; which was up by a fifth from the previous year. And with their high penetration of mobile phone usage and internet accessibility, Hong Kong has one of the highest consumer fintech adoption rates of 67%, exceeding the US, Japan and France. But more interestingly we are seeing how the adoption of fintech in the banking space has encouraged a full digitalisation of their operations, from both the front-end and back-end. The Hong Kong Monetary Authority (HKMA) is promoting fintech adoption to banks, leveraging digital banking in order to remain competitive and secure new customers. In 2022, mobile banking apps and online banking were the most popular channels among Hong Kong consumers, with mobile banking penetration reaching near 80%.  With the government and local bodies partnering to drive initiatives, the momentum around technological transformation is growing as fintechs are welcomed with benefits from new and existing funding schemes and benefits.

Why are companies choosing Hong Kong?

In 2022, the government was extremely keen to push technological growth in the region, and used their InvestHK department of the SAR Government to launch the FintechHK Community Platform. The purpose behind the space is to act as a centralised fintech platform to connect local and global tech companies, which would inspire growth, connectivity and drive business opportunity. This has since been furthered by the launch of the Office for Attractive Strategic Enterprises (OASES) at the end of 2022, to attract and engage with global businesses through the use of incentives. The incentives include financing, visas, taxes and land to entice brands to settle in Hong Kong and bring their technologies, products and support to the wider economy. 

The evident commitment to fintech from the government, physical space and large population has been drawing in businesses, fintech companies and aspiring start-ups for years as they seek a space which they can use as a launch pad. With the fertile market and presence of numerous brands, entering Hong Kong allows merchants to effectively tap into another side of fintech and reap the benefits of resources and opportunities by tapping into Asia and likeminded organisations. 

Some of the top reasons noted for businesses entering Hong Kong include:

1. Rich financial services opportunities
2. Reliable infrastructure of internet, digital access and mobile phone
3. Access to markets compiled with tech-savvy, underbanked and younger generations who are some of the most poignant demographics for fintechs
4. Progressive regulatory activity to reduce risk of fraud and support easier access to Hong Kong’s capital market
5. Appetite for change from government to end-consumer levels
6. Growing talent pool, filled with new graduates who are versed in the latest industry knowledge and understanding of innovations.

What does this mean for future generations?

With global incentivisation, a booming population, and new regional initiatives the future for Hong Kong is bright. The variable is dependent on the success of entrants but also the younger generations who will be pivotal to driving new ideas to continue the financial sector’s growth. With businesses still veering towards Asia and Hong Kong, the need for generational knowledge will be fundamental to driving fintech in the long term. In fact, the government has also invested resources to tackle ‘brain drain’ and encourage students to access fintech internships in tech companies, which will promote fintech, attract professionals and encourage higher education in relevant subjects. Agreeingly, William Ip, Head of APAC at Unlimit commented, “whether you’re employed or you’re still a student, if you want to pursue fintech, the first thing you need to do is to have what we call a growth mindset. In other words, don’t be afraid of failure, it’ll lead to growth”.

A combined approach of government focus on internal talent and upskilling, and incentives for global companies is supported by the growing presence and availability of financial innovation in Hong Kong’s digitally-accessible community – making the region a powerhouse for technological influence. Already end-users in Hong Kong are being opened to top-tier technologies with omnichannel capabilities which will drive positive and consistent customer experiences. Whether it’s QR or online payments, the tech-savvy consumers of Hong Kong will be seeking digital channels which are optimised and offer added-value. Already more than half of consumers did not step into a bank branch in the last year in Hong Kong, furthering the need for digital adoption in payments across the board to remain abreast of competition in the region. This will in turn create a digitally driven space for businesses and customers, with fintechs driving value in their platforms with convenience, inclusivity and accessibility.