How Hong Kong can emulate Singapore’s leadership in the FinTech race
With Singapore leading the way – in not only regional terms but on a global level – Hong Kong clearly has some catching up to do, says Ray Ferguson, Founder & Managing Partner, Caber Partners.
Singapore and Hong Kong’s decades-old tussle for position as Asia’s premier financial centre has produced a uniquely modern twist – both cities have been investing hundreds of millions of dollars in their battle for supremacy in the field of financial technology (FinTech).
“Traditionally as a financial centre, there’s that comparison between Singapore and Hong Kong,” acknowledged Roy Teo, head of the financial centre development department at the Monetary Authority of Singapore (MAS) last year, “But when it comes to fintech, this is where we recognize that there’s a lot of need for collaboration”.
However, these rivals are not competing on a level playing field. Their respective ‘FinTech weeks’ illustrate how mismatched their rivalry has become. Over the past couple of years, both cities have held similar conferences, at similar times. Organisers of this year’s Hong Kong FinTech Week expected over 3,000 executives; while the week-long Singapore FinTech Festival 2017 welcomed more than 30,000 participants from over 100 countries – maintaining its status as the world’s largest event of its kind.
Hong Kong has enjoyed status as a prominent financial centre almost since its beginnings. However, it has fallen behind in the FinTech race.
An insightful example of Singapore’s proactivity can be seen in its four-month long matchmaking programme, providing opportunities for FinTech start-ups to access local and global investment. This year’s programme (climaxed by Singapore FinTech Festival’s Investor Summit or ‘Deal Day’) confirmed that most FinTech investors (59%) and companies (36%) come from Singapore.
So what lessons can Hong Kong learn from Singapore’s FinTech scene?
1) Broaden its horizons with mutually beneficial international collaborations. Norman Chan, chief executive of the Hong Kong Monetary Authority, has confirmed FinTech initiatives with the Office of Financial Development Service of Shenzhen, China. Compare this to Singapore’s leading example: its central bank is signing 16 cooperation agreements with other governments aimed to stimulate information on FinTech issues.
2) Invest heavily in the future of the industry – especially A.I. Hong Kong chief executive Carrie Lam pledged to boost the innovation and technology sector with initiatives, including a US$900,000 award for developing “outstanding FinTech products and solutions” for financial institutions in both Hong Kong and China’s Shenzhen. Compare that with MAS’s US$20 million grant to support adopting and integrating artificial intelligence and financial data analytics. Additionally, Singapore’s central bank and the Massachusetts Institute of Technology (MIT) will collaborate on FinTech research and development, enabling Singaporeans to work with world-renowned researchers.
3) Innovate to stay ahead of the game. Professional service company KPMG, recently reviewed Hong Kong’s banking industry. It noted how Hong Kong’s government is striving to foster an ecosystem more conducive to FinTech innovation, including blockchain transactions.
But while Hong Kong works to implement regulations, Singapore seeks to advance its standing by innovating and experimenting with formats. Project Ubin is a collaborative project with the industry to explore the use of Distributed Ledger Technology (DLT) for clearing and settlement of payments and securities. DLT has shown potential in making financial transactions and processes more transparent, resilient and at lower cost. The project aims to help MAS and the industry better understand the technology and the potential benefits. This is with the eventual goal of developing simpler to use and more efficient alternatives to today’s systems based on digital central bank issued tokens. MAS also plans to work with the International Finance Corporation to establish the ASEAN Financial Innovation Network.
Singapore has long been known for its pragmatic approaches to economic development and is accustomed to supporting the development of its financial services sector in particular via rapid legislation, a knack for innovation and heightened responsiveness to global trends.
With Singapore leading the way – in not only regional terms but on a global level – Hong Kong clearly has some catching up to do. It is vital that, in striving to increase its standing, Hong Kong receives legislative support, as well as increased industry investment. The incentive is obvious. According to research firm CB Insights, Fintech investments in Asia are expected to set a new record this year, topping last year’s US$6.3 billion.
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