What We Can Expect From The Future Of Hong Kong’s Fintech Scene
One of the buzzwords in the startup community for the last several years has been “fintech.” This hot topic covers a broad subject area but the actual meaning of the term is often not fully understood. What is clear is that Hong Kong remains one of the most prominent financial centers in the world and as such, the city is well positioned to becoming one of the global leaders in fintech.
Let’s start with the basics. Fintech is short for financial technology. The term itself is usually used in the context of startups but on a broad scope it can include large financial institutions (banks), large tech companies (Google, Apple and Facebook), companies that facilitate financial transactions (MasterCard, Nasdaq), startups (Stripe, Betterment, Qupital) and even crypto-currencies such as Bitcoin. Other popular areas that fintech encompasses include crowdfunding, mobile payments, machine learning, predictive behavioral analytics, data-driven marketing, AI, cybersecurity, blockchain, big data, robo-advisors and digital wallets.
So who uses fintech? Pretty much everyone in the world. As technology has rapidly evolved over the last ten years, the earliest adopter of fintech was naturally the financial services industry. But with the recent rise of the smartphone, there is a clear change in consumer behavior resulting in people having unlimited access to data at their fingertips. In the very same way that all companies must now participate in digital and social media marketing (or be left behind), so must companies incorporate fintech systems into their infrastructure to survive. Fintech ultimately allows companies to use innovation and technology to reduce costs, enhance product offerings and provide services faster to their consumers.
You’ve been warned
As is the case with any large structural shifts in technology, for all the benefits that fintech brings there exists negatives as well. Right off the bat you can see the potential negative impact on the workforce as multitudes of manual or operational roles will look to get replaced by technology. A Citigroup report released in 2016 predicted that 30% of banking jobs could disappear between 2015 and 2025 as technology replaces human beings.
After reading this report, I was intrigued so I decided to ask my friend and local fintech thought leader Henri Arslanian, the PricewaterhouseCoopers FinTech and RegTech Lead for Hong Kong and China, what he thought of the situation. Interestingly enough, Arslanian believes the even greater threat comes not from the loss of jobs but directly from the large technology companies themselves.
Hong Kong as a leading global fintech hub
Hong Kong’s strength as a global financial hub is obvious. The city is consistently ranked in the top five financial centers of the world by a number of global surveys and metrics annually, including the World Economic Forum’s Financial Development Report. Peter Diamandis of X Prize Foundation and Singularity University argues that in the years between 2016 and 2020 as many as three to five billion new people will come online, primarily from China and India. Hong Kong’s proximity to both of these countries makes it a natural frontrunner to be the region’s leading fintech hub.
Anticipating this opportunity, a number of organizations and events focusing on fintech have popped up locally including FinTech Hong Kong, Accenture’s FinTech Innovation Lab and Next Money’s fintech finals startup competition (Asia’s largest). Finally, the Hong Kong Monetary Authority (HKMA) has also establish a Fintech Facilitation Office in anticipation of the rapid evolution of fintech in the city.
The future of fintech
The changes happening these days in fintech occur at such a rapid pace that it is hard to predict what the future holds. It’s clear to spot some of the leading trends including robo-advisors and the use of Blockchain technology (originally designed for Bitcoin). But according to Arslanian, one of the biggest trends to come is often overlooked and that’s in the not-so-sexy area of RegTech.
“I think is the most promising for the next year to come is really RegTech, which is Regulatory Technology, which is basically the use of some of the new technologies to really address some of the regulatory and compliance, not only more effectively, but also more efficiently.”
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