Can you tell us about InvestHK?
InvestHK has been around since the early 2000s. Its primary mandate is to attract companies, investors innovation labs, etc. to set up in Hong Kong in a way that promotes a richer ecosystem in various strategic sectors. We have nine sector teams. The fintech team is the newest, established back in 2016. Under the directive of Financial Services and the Treasury Bureau (FSTB), our Fintech Unit is also responsible for helping foster a vibrant Fintech Ecosystem with the ultimate goal of raising the competitiveness of the financial services sector in Hong Kong.
Our ecosystem is evolving in phases… Looking ahead, phase three is going to be about more advanced products that require sophisticated technologies such as AI and DLT to support and deliver.
How is the fintech ecosystem evolving in Hong Kong?
Our ecosystem is evolving in phases. During the first phase, we saw lots of activity on low hanging fruit. Payments is a good example of this. Hong Kong is the center of a lot of cross-border payments and transactions. Because of our unique position, we have a very large and well-developed payments ecosystem. A number of companies are getting sizeable investing funding. For example, Airwallex, one of our unicorns, recently closed a US$160 million investment in April. Lending is also part of phase one, as well as wealthtech because of Hong Kong’s enormous market size for wealth management.
Now, I would say we are in phase two. As a part of phase two, we are seeing the rise of insutech, regtech, and enterprise solutions. Hong Kong has many banks, insurance companies and asset managers so we have very fertile soil for B2B fintech solution providers. Two other segments that might not be mainstream but highly strategic in Hong Kong are capital markets and the digital asset space. It goes without saying that because of Hong Kong's world leading capital market, major players such as HKEX and investment banks are actively looking for innovative technologies. Hong Kong is also one of the largest crypto markets in terms of liquidity flow. In November 2019, our regulator launched a new regulation that will give licenses for crypto exchanges. This is really going to legitimize the whole crypto space, which will likely spur more investment here in Hong Kong.
Looking ahead, phase three is going to be about more advanced products that require sophisticated technologies such as AI and DLT to support and deliver.
How has COVID-19 affected fintechs in Hong Kong?
One area is remote on-boarding, such as KYC and digital ID. There are numerous companies in that space, but for them the pace of adoption has been modest. The past few months changed all that. Some of the leading incumbent players have seen online customer growth of 30-40 percent. Newer players are seeing 100 percent customer growth. There is no doubt the pandemic is a factor in this growth. People at home are doing their banking and looking for related services online.
What are you most excited about for the future?
Over the past 12 months, Hong Kong has issued a number of new virtual bank licenses. Now, various licensees are revving up operations. For example, Mox Bank collaborated with Mastercard on a credit/ATM card with no numbers. This is a good development in terms of security and consumer protection. Imagine that every new virtual bank will have a new hook to set themselves apart. We are excited about what those new innovations will look like.
Head of Fintech, InvestHK