Hong Kong

A formidable hub for fintech

With a progressive and robust regulatory regime, sophisticated infrastructure and a rich talent pool, Hong Kong is ramping up to be a global fintech capital

More than 30,000 visitors gathered in-person to attend the seventh Hong Kong FinTech Week, organised by the Government of the Hong Kong Special Administrative Region (HKSARG) in late October and early November 2022. There were more than 5 million views from 95 countries and territories around the world too.

More than 30,000 visitors gathered in-person to attend the seventh Hong Kong FinTech Week, organised by the Government of the Hong Kong Special Administrative Region (HKSARG) in late October and early November 2022. There were more than
5 million views from 95 countries and territories around the world too.

Following on from the fully-virtual event in 2020 amid the Covid-19 pandemic and the hybrid event in 2021, it highlighted not just the booming interest in fintech companies and services, but also the enduring strength of Hong Kong as a financial centre.

“The scale of the event reflects how Hong Kong is at the forefront of the world of fintech,” says Eddie Yue, Chief Executive of the Hong Kong Monetary Authority (HKMA), the city's central banking institution and co-organiser of FinTech Week, describing it as “one of the world's largest gatherings of fintech executives and thought leaders.”

“In the last few years, we have come a long way in building the fintech ecosystem, and I can confidently say that Hong Kong is now firmly at the forefront of the global fintech landscape,” he added.

We have come a long way in building the fintech ecosystem, and I can confidently say that
Hong Kong is now firmly at the forefront of the global fintech landscape.”
Eddie Yue
Chief Executive
Hong Kong Monetary Authority

Deep roots

The surge in Hong Kong’s fintech industry can be traced back to 2017, when the HKMA launched its Smart Banking initiatives, including an enhanced fintech supervisory sandbox, the promotion of virtual banking and other schemes. The HKMA has built on that with its Fintech 2025 strategy launched in June 2021, which encompasses an “all banks go fintech” push.

Currently, Hong Kong is home to more than 800 fintech companies, up more than fourfold from the 180 it had five years ago. That growth has been powered by Hong Kong’s open market, a progressive and robust regulatory regime, sophisticated infrastructure, the free flow of capital, a rich talent pool and deep funding pool.

Also important has been Hong Kong’s long history as a global financial centre. “This is not something that is easily replicated, it’s been built over decades,” says Neil Tan, Chairman of the Fintech Association of Hong Kong. “You have to create the conditions for this to grow over time. It doesn’t matter how much money you throw at it, it’s more of a time issue.”

The fintech scene is built on strong financial sector foundations. According to the HKMA, Hong Kong has US$3.5 trillion worth of assets in its banking industry and is second only to Switzerland as a private banking centre. It is also Asia’s largest cross-border private wealth management centre and a hub for businesses wanting to raise capital, being one of the most active markets for stock market listings and bond issuance.

The financial services industry also contributed almost a quarter of Hong Kong’s GDP, and employed about 277,500 people – 7.6 per cent of the total workforce in 2021.

Hong Kong has US$3.5 trillion worth of assets in its banking industry and is second only to Switzerland as a private banking centre.

Hong Kong’s
Financial Services Sector in Numbers

Hong Kong’s Financial Services Sector in Numbers

Contributed
21.3%
of the city's GDP
Employed
277,500
people
which is about
7.6%
of total employment in 2021
Sources : HKSARG
This is not something that is easily replicated, it’s been built over decades. You have to create the conditions for this to grow over time. It doesn’t matter how much money you throw at it, it’s more of a time issue.”
Neil Tan
Chairman
Fintech Association of Hong Kong

The right ecosystem

The banking sector is at the heart of Hong Kong’s appeal for fintechs, with a rich pool of potential customers. “Hong Kong has been a finance hub for the region for decades,” says King Leung, Head of Fintech at InvestHK, the city’s inward investment agency. “We have so many financial institutions: 160+ banks, 160+ insurers. We have 1,000+ wealth management firms, thousands of securities firms and brokers. For a B2B fintech, Hong Kong is a ‘can’t miss’ market. You go to New York and London, but in Asia where do you go? You have to go to Hong Kong. This is where the market is.”

It is also helped by its location, on the doorstep of mainland China and part of the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) – a region also encompassing Macao and nine mainland Chinese cities with a combined population of around 86 million.

“The development of the GBA heralds massive opportunities for Hong Kong, so we have been stepping up our efforts in cross-boundary fintech cooperation to help financial institutions and fintech companies,” says Yue.

The importance of links with mainland China flow in both directions. Not only is Hong Kong an entry point for international firms looking to China, it also acts as a bridge to the world for mainland Chinese firms. Hong Kong’s gateway role will continue to be strengthened by a series of mutual market access schemes, which facilitate two-way capital flows between Hong Kong and the Mainland, including Stock Connect, Bond Connect, Cross-boundary Wealth Management Connect and Swap Connect.

“In mainland China, there are roughly over 48 million micro, small and medium-sized enterprises and many of them are selling around the world, taking money in pounds and euros and dollars. Hong Kong is used almost like an exchange shop,” says Leung. “That’s why a lot of payment firms set up a presence in Hong Kong, to help facilitate that money exchange role.”

Not only is
Hong Kong an entry point for international firms looking to China, it also acts as a bridge to the world for mainland Chinese firms.
For a B2B fintech, Hong Kong is a ‘can’t miss’ market. You go to New York and London, but in Asia where do you go? You have to go to Hong Kong. This is where the market is.”
King Leung
Head of Fintech
InvestHK

Government support

Hong Kong’s own regulators have for many years played a critical role in aiding the development of the sector.

A Fintech Facilitation Office (FFO) was set up by the HKMA in 2016 to promote Hong Kong as a regional fintech hub. It enables stakeholders to exchange ideas and connect with regulators.

“The FFO is not working in isolation. Other parts of the HKMA work alongside it, and of course it must work with the banking, technology and even legal sectors,” says Yue. “The FFO has essentially served as the coordination point of this collective effort. This has enabled a ‘change’ mindset to spread throughout our organisation and among our partners. And the result is the impressive fintech developments we have seen.”

The Fintech Association of Hong Kong also works to link different parts of the industry. “We’re a super-connector inside the fintech ecosystem,” says Tan.

The key players also include universities, many of which offer fintech programmes. Hong Kong Polytechnic University, for example, was ranked as the number one blockchain university globally in 2022 by CoinDesk, a crypto asset information platform.

World-class talent

That plays into the critical element of talent development. As well as encouraging home-grown skills, the authorities have also developed a series of initiatives to attract talented nationals from overseas and the Mainland into Hong Kong.

“There’s no question that there’s a lot of talent in mainland China,” says Tan. “Hong Kong has introduced different programmes to bring that talent across. But it comes down to what market you’re serving. If you are serving China you don’t need to bring them across, you just hire them there.”

“In the past two years, we have seen firms from mainland China still finding ways to settle in Hong Kong,” says Leung. “On the B2B side in particular, once they are able to land anchor clients, they are able to find local hires, like a head of sales or a country manager to get things moving.”

The fintech sector is constantly evolving, perhaps faster than any other area of mainstream finance. At the Hong Kong FinTech Week 2022, a key area supported assertively by the Hong Kong government was virtual assets. A bill to set up a statutory licensing regime for virtual asset service providers was passed by the city’s Legislative Council and the government said it was exploring a number of pilot projects to test the benefits of virtual assets and how they could be used in financial markets.

There is still far more to be done in terms of fintech adoption by financial institutions, according to Leung. He also points to the potential in other areas such as digital assets and blockchain-enabled business models. “In the longer term, fintech solutions can be leveraged to address issues such as climate change and aging populations,” says Leung. Hong Kong’s fintech companies look as well placed as any to make the most of those opportunities.

At the Hong Kong FinTech Week 2022, a key area supported assertively by the Hong Kong government was virtual assets.
There is tremendous synergy and network effect when different ecosystems connect together. As leading international financial hubs, both ADGM and Hong Kong serve as gateways for the fintech community to tap the enormous market opportunities.”
Wai Lum Kwok
Senior Executive Director for Fintech
Financial Services Regulatory Authority of Abu Dhabi Global Markets (ADGM)

Lessons for the world

Lessons for the
world

The opportunities offered by Hong Kong’s fintech scene are attracting interest from around the world, not least the Gulf where key players are keen to find synergies. “There is tremendous synergy and network effect when different ecosystems connect together,” says Wai Lum Kwok, Senior Executive Director for Fintech at the Financial Services Regulatory Authority of Abu Dhabi Global Markets (ADGM). “As leading international financial hubs, both ADGM and Hong Kong serve as gateways for the fintech community to tap the enormous market opportunities in the wider Gulf and greater China region respectively.”

ADGM signed an agreement with the HKMA in 2018 to jointly promote and enable financial services innovation, and accelerate cross-border fintech opportunities. ADGM has also collaborated with the Fintech Association of Hong Kong and InvestHK to organise a pitching competition to showcase the fastest-growing fintechs in Hong Kong.

In the series

TRADE
Hong Kong: The gateway to opportunities in Asia and beyond